South Australian Data Wrap – 25 August

This week has been a quiet week for Australian Bureau of Statistics data releases in respect of the South Australian economy.

There was good news for the state economy with the announcement that OZ Minerals’ Board had approved the $916 million development of its Carrapateena copper gold mine. The mine is located 160km north of Port Augusta. Work on the development is scheduled to commence in September 2017 with production expected to begin in the December quarter of 2019.

On a less positive note, Business SA’s latest survey of business expectations indicated that business confidence and general business conditions in South Australia fell in the June quarter (by 5.4 and 6.6 index points respectively). The Business SA survey indicates that general business conditions have declined since late 2016. This result stands in stark contrast to the National Australia Bank’s monthly business survey, which as we mentioned last week indicates that business conditions in South Australia have improved considerably since late 2016. Clearly someone has it wrong.

Local Government Price Index
The SA Centre for Economic Studies this week released the June quarter estimates of the Local Government Price Index (LGPI). The LGPI measures price movements faced by Local Government in South Australia in respect of their purchases of goods and services. It is analogous to the Consumer Price Index (CPI) which is a measure of price inflation faced by households. The price inflation faced by local government (and indeed all levels of government) naturally varies from that faced by households due to substantial variations in the mix of goods and service purchased by local government in comparison to households (for example, local government directly employs people, whereas the vast majority of households do not.).

The LGPI rose by just 0.1 per cent in the June quarter 2017, down from 0.6 per cent in the March quarter. The Adelaide CPI also slowed over this period, from 0.4 per cent in the March quarter to 0.1 per cent in the June quarter.

While the LGPI rose in line with the Adelaide CPI in the June quarter, it has risen more strongly over the past year. The LGPI in the June quarter 2017 was 2.0 per cent higher compared to the corresponding quarter a year earlier, whereas the Adelaide CPI rose by 1.6 per cent over this period.

Both the LGPI and CPI have been growing at a subdued pace over recent years, which can be partly attributed to the excess slack in macroeconomic conditions over this period. Subdued wages growth, which is a key component of the LGPI, has also been a particularly significant factor behind the subdued pace of price inflation.

Looking forward, it is likely that both the LGPI and Adelaide CPI will kick up in the September quarter as utility price increases (especially for electricity) implemented from the start of the current financial year are picked up by the various price indices.

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