South Australia's economy at snail's pace The economic gloom surrounding South Australia may take a while to clear, reports indicate. Picture: Matt Turner Source: adelaidenow CONTINUING falls in interest rates and the exchange rate are critical to a turnaround in South Australia's economy, which remains the worst performing of all mainland states, two key economic reports have confirmed. Reports released today by Deloitte Access Economics and CommSec blame sluggish population growth and soft retail spending for the lull in economic activity which has lingered since the global financial crisis. But new home lending remains a bright point, up 9.5 per cent for the year and reaching its highest point in more than three years. Deloitte's latest Economic Business Outlook says lower interest rates have had little impact on retail sales, and population growth continues to lag behind the other states. "Frustratingly, the rebound in population growth appears to be topping out in this state before doing the same nationally, underscoring that demography remains an achilles heel," it says. The myriad of pressures on the state's economy over the past year, led by the impact of the high Australian dollar on manufacturing and weakness in the housing construction sector, have seen the rate of unemployment in South Australia shoot upwards to the highest level in almost nine years. The rate remains higher than the national average and recent falls in job vacancies suggest that the outlook for South Australia's employment growth over the next few months isn't that positive. Despite recent falls in the exchange rate, currency-sensitive industries such as the automotive sector need that trend to continue to see a revival in demand. "Dollar damage is large," the Deloitte report says. Although the decision by Ford to stop making the Falcon in Australia in late 2016 looks like a bullet dodged for Holden and hence South Australia, there are critical mass risks here. If enough local production goes, it becomes harder for remaining manufacturers to keep going. Deloitte forecasts a decline in the state's share of national output in the next five years, from 6.2 per cent to 5.8 per cent. Premier Jay Weatherill said yesterday the State Government was acting in response to the economic downturn. "In a difficult international environment South Australia continues to grow and we have policies to make sure that we'll grow further into the future," he said. Western Australia leads the country's six best performing states and territories, according to CommSec's State of the States report, with a gap to South Australia and another gap to Tasmania. Major construction work was highlighted as a bright spot, but as warned by the Civil Contractors Federation last week, that is being led by a series of major government infrastructure projects which are due to tail off next year.