When General Motors-Holden announced the imminent closure of its Australian manufacturing operation, late last year, it marked the end of a formative era for SA.
The company’s long history in the state contributed to significant population growth in Adelaide in the decades following WWII and the development of the suburb of Elizabeth. For many years Holden was the flagship of SA’s car industry and one of the state’s major employers.
Months of confidence-eroding speculation ended when GM announced its decision to close down, but it also became clear that the fate of at least 1,600 state workers had been sealed.
While GM Holden managing director Mike Devereux said it was a priority to ensure the best possible transition for those workers, there was immediate consternation about what the closure would mean for the wider South Australian economy.
A National Institute of Economic and Industry Research report estimated the Australia-wide cost to the economy would be an annual $4bn and that over 65,000 jobs would be lost by 2020. Twelve thousand of those jobs would be in SA.
APM’s Andrew Wilson believes that, while the economic and confidence impact of the closure will be significant, there is too much political capital involved for nothing to be done. There will have to be policies and initiatives designed to moderate the employment market and the closure’s impact on it, he says.
The bigger picture is that SA’s economy is a poor performer and has been for some time, in Wilson’s view. “There is not a lot of significant economic activity for SA to hang its hat on generally. The unfortunate Olympic Dam saga and now the double whammy of the Holden closure have impacted on the real economy and confidence.”
Unemployment is now sitting at around 7%, which is about 1% over the national rate, he says. “This situation will take some time to recover from and is fundamentally negative for income and house price growth.”
All of this means that the SA property market has long been a flat market overall and is set to continue to be for some time.
Meanwhile, the Adelaide market has always had less peaks and troughs and volatility than other capital city markets, Wilson says. “Going forward, the market will remain subdued market due to the generally weak SA economy. I forecast very moderate price growth of 1-3% over the coming year.”
