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Mining Spending To Dominate Investment
SA is rich in the minerals in high demand by rapidly industrialising countries such as China and India, which augurs well for the future of the local mining industry as investment spending increases after a slowdown in exploration during the global financial crisis.
The latest edition of the BankSA Trends economic bulletin compiled in conjunction with Access Economics finds that resources already accounts for 30 per cent of SA's export earnings, but this is running below the national average of 40 per cent of export earnings.
An assessment of SA's investment pipeline by industry shows 48 per cent of business investment is destined for mining and metals, ahead of 27 per cent for infrastructure projects.
SA has almost 40 per cent of the world's known uranium reserves, along with large amounts of copper, gold and silver and the number of operating mines has risen from four to 12 since 2004.
Trends outlines that decisions made about the potential expansion of BHP Billiton's Olympic Dam project will be central to whether SA is able to fully realise the potential of its resources sector. Decisions about Olympic Dam will have a much bigger impact on the State than the proposed Minerals Resource Rent Tax, which does not apply to the main minerals found at Olympic Dam.
The re-design of the mining tax announced on July 2 limits the tax to iron ore and coal projects. That is a better outcome for SA than the original proposal, and Trends concludes that while the new tax might slow development of the State's mining sector it is decisions regarding Olympic Dam that will be the big influence on growth.
BankSA managing director Rob Chapman said spending on mineral exploration in SA did fall during the global financial crisis, but was set to rise again.
"The minerals we have in the ground are the right ones to have when it comes to global demand. South Australian has history on its side and the potential for further discoveries is high," he said.
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Trends also closely scrutinises the retail sector in SA and finds the State is over-represented in the amount its residents spend on pharmaceuticals, beauty products, specialty foods, books and newspapers.
South Australia accounts for around 7.4 per cent of Australia's population and has a similar share of retail spending.
It spends a relatively larger share of retail dollars on pharmaceuticals, at 9 per cent of the national retail spend, mainly because of its older population, and around 8.4 per cent on specialty foods.
Interestingly, South Australians spend a relatively low amount on liquor from shops compared to the national spend, and are also under-represented when it comes to spending on cafes, restaurants and takeaway food.
Mr Chapman said SA had been a strong economic performer throughout the global financial crisis on a number of economic indicators, and the retail sector had been one of them.
Trends also outlines that since 2005 South Australians have been spending a higher proportion of family income at the shops than the national average, after being below the national average from 1997 until 2005.
South Australians were spending around 32 cents in the dollar on retail by 2005, up from 27 cents in 1997, and it is now sitting at around 30.5 cents.
Mr Chapman said the rapid run-up in house prices in SA, rising population growth and increasing confidence levels have combined to trim the amount of disposable income being spent at the shops.
