Action needed to relieve job stress: academic

Professor Sarath Delpachitra (cropped)
Professor Sarath Delpachitra

A Flinders University business academic has backed a bid by South Australia’s Premier Jay Weatherill to raise GST to 15%, stating that the state is facing unprecedented economic problems in 2016.

The downturn in mining, oil and gas, manufacturing and other sectors, closure of auto and carparts industries, and delays in major projects including shipbuilding – together with falling tax income and rising health and education costs – will combine to drive unemployment levels much higher next year, says Professor Sarath Delpachitra, from Flinders University’s Business School.

“South Australia is at quite a critical junction, with unemployment set to climb in 2016,” says Professor Delpachitra, who forecasts a 3-5 year transition as new industry sectors grow to produce sustainable jobs growth.

Professor Delpachitra says the Federal Government’s $1.1 billion National Innovation and Science Agenda comes too late to generate significant job creation in the short term.

He said the State and Federal Government needed to invest in more infrastructure projects to provide jobs in the meantime.

“Even the oil and gas industry, one of the other mainstays of South Australia’s economy, is facing the prospect of further cuts in the oil price and a glut of oil which could make it unviable to produce in Australia,” Professor Delpachitra says.

“In such difficult times, it’s unfortunate that the Federal Government has chosen to withdraw its support for the car industry. Another challenge is the recent emissions target which will affect the viability of traditional energy enterprises, such as coal mining.

“Without a lifeline, our State economy will struggle, unemployment will rise, and public services will be further cut in 2016 and beyond.”

At this month’s COAG meeting, Mr Weatherill sought support to lift the GST by 5% and let the Commonwealth keep the extra GST money – about $34 billion – which he suggested would be used to cut company tax.

Along with allowances for low income earners, the States would then get a share of about one-fifth of income tax raised by the Commonwealth to help pay for rising costs associated with the rapidly growing health system.

Professor Delpachitra says the State Government will struggle to subsidise new enterprise and fund more jobs when its main focus is on health and welfare spending.

“The State economy is taking some massive blows and the Premier has few choices but to ask the Federal Government to increase GST to recover some of the associated falls in tax revenue,” he says.

On the bright side, Professor Delpachitra says plentiful land supplies, cut in business stamp duty and wage considerations will help promote SA as a more affordable State to do business – and desirable place to live – which could help to attract new enterprises.

He also says the State is in a good position to attract overseas investment – given the comparative value of property prices in contrast to the eastern states.

“Some of these industry closures, and industrial and commercial land for sale, will be opportunities for investors to buy assets ahead of the future upturn,” he says.

Professor Delpachitra says South Australia should work hard to attract its fair share of foreign investment which tipped to increase by 50% to around $75 billion in Australia in the next 4-5 years.

“Property prices on the eastern seaboard are hitting their peak but that’s not the case for South Australia where there are plenty of opportunities and bargains.

“There is not much publicity about the SA economy despite greater incentives for public-private partnerships.

“This state needs to promote the real opportunities that exist and market SA as the right place to invest in some substantial bargains compared to the major cities (Sydney and Melbourne),” Professor Delpachitra says.


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