Policy support offers opportunities for SA post pandemic

Policy support from the South Australian and Federal governments for employment and training initiatives could play a crucial role in boosting the State’s population and recovery from the impact of the COVID-19 pandemic, according to the University of Adelaide’s SA Centre for Economic Studies (SACES).

In a major new analysis of the potential impact on SA's population of the COVID-19 pandemic, SACES identifies:

• the critical role of net overseas migration, to which Adelaide's appeal as the ‘third most liveable city’ in the world could be marketed;
• an opportunity to expand the current turnaround of the historic ‘brain drain’ that has compromised the State’s economic growth; and
• policy initiatives like paid internships, payroll tax reductions (particularly for businesses in regional South Australia), and Age Pension incentives to boost the State’s population growth and labour force participation.

SACES Executive Director, Associate Professor Michael O’Neil, said the SACES analysis examined the nexus between population movements and the State’s economic health. The research, which produced three separate papers, was undertaken on behalf of the SACES Independent Research Fund, a group of key private and public sector individuals which sits under the umbrella of SACES.

“The detailed insights we gained into the population and economic implications of the COVID-19 pandemic indicate there are a number of policy initiatives that could be adopted by the State and Federal governments to underpin SA’s recovery from the pandemic,” Associate Professor O’Neil said.

Drawing on its population analysis, SACES maintains that “Australia cannot continue to be a ‘fortress nation’ forever and sooner or later international borders will reopen”.

Net overseas migration to SA reached 16,630 people in 2019 – not far below the all-time peak of 17,630 in 2008. The closure of Australia’s borders to international migrants saw the numbers dive to only 4,410 people in 2020. International student numbers more than halved in 2020.

SACES concludes that “population growth in South Australia will remain reliant on the resumption of overseas migration which was the largest source of overall population gains in the 15 years prior to the pandemic”.

“Its importance will only grow in the future given the expectation that gains from net natural increase will decline and eventually reverse as deaths rise and births remain broadly static or decline,” it says.

While the opening up of the Australian economy to international migrants would make an important contribution to Australia’s population growth, Associate Professor O’Neil adds a cautionary note.

“It is important to get the balance right between encouraging overseas migration and supporting our young people because skilled migrants tend to put downward pressure on wages and reduce the responsibility of local businesses to provide training to local staff,” Associate Professor O’Neil said.

South Australia has, historically, suffered a net loss of skilled employees to interstate markets but this so-called ‘brain drain’ was reversed in the June, September and December quarters of 2020, a reflection, in part, of the impact of COVID-19 on labour mobility.

“South Australia has generally performed better than other states in regards to management of the pandemic while other states have implemented more lockdowns and border closures over the past sixteen months, further restricting interstate mobility,” SACES says.

It adds: “Since the onset of the pandemic, South Australia has enjoyed a reversal in net interstate migration flows, experiencing net interstate population gains of approximately 100 persons per quarter on average over the last three quarters of 2020. While these gains are minor, they represent a significant turnaround from recent historical experience whereby the state lost an average of approximately 1,350 people per quarter through net interstate migration flows in the five years prior to the pandemic. Moreover, they represent the only sustained gains in net interstate migration since the early 1990s.”

Associate Professor O’Neil said there are a number of policy initiatives that could encourage population and employment growth as the State emerges from the economic and social challenges imposed by the pandemic.

“Reversing and maintaining the current trend in net interstate migration is a key public policy priority that can be partially achieved through much faster job creation in high valued added sectors. Paid commencement internships and payroll tax support are possible policy levers in this regard,” Associate Professor O’Neil said.

SACES’s analysis also found that the employment potential of high value-added developments seen recently in the pharmaceutical, artificial intelligence, and space sectors, could also be stimulated with support for the creative industries.

“The creative industries extend into, among other things, the arts, photography, niche manufacture of ceramics, glassware, small bars and niche brewing and distilleries, and create vitality within the CBD and inner suburbs to retain the mantle of Adelaide as the ‘third most liveable city’ in the world. With ongoing population ageing, employment will continue to grow strongly in the health and social assistance sector,” it says.

Associate Professor O’Neil said Adelaide’s ranking as the ‘third most liveable city in the world’ in The Economist Intelligence Unit’s Global Liveability Index this year was founded on receiving the maximum scores for healthcare and education, and very high scores for infrastructure, stability, and culture and environment.

“As the world emerges from the COVID crisis, and people start moving again, South Australia’s enviable position in terms of healthcare, education, housing value and lifestyle should prove very attractive to potential interstate and overseas migrants,” he said.

The SACES research suggests that the health, aged and disability care, and related services will continue to be a driving force in employment growth with an additional 30,000 jobs in these areas by 2030. The generally improving health and increasing longevity of people over 65 years of age, as two drivers of the large expected further increase in SA’s older population, also presents opportunities for helping offset the adverse impact on labour force growth of lower international migration.

“One possible Federal Government initiative would be to reduce the impact of the earned income test on Age Pensions,” Associate Professor O’Neil said.

The State’s total population in 2031 is estimated to be 1,922,855, up from 1,720,000 in 2017.

Copies of the three papers may be downloaded from the Independent Research Fund page of the SACES’s website.