Economists from Adelaide University expect the South Australian economy to post ongoing moderate growth in 2026, driven by rising domestic spending and a recovery in the grain crop.
Household spending has strengthened as a result of improved incomes and some abatement of cost-of-living pressures, while government spending remains strong due to major infrastructure works.
“The international economy remains a major risk, but South Australia’s trade performance was quite solid in 2025,” said Jim Hancock, Deputy Director of Adelaide University’s South Australian Centre for Economic Studies (SACES).
“There was a downturn in grain exports, but this stemmed from poor seasonal conditions and is temporary. Exports of services increased strongly, and copper exports benefited from strong prices on international markets.”
The South Australian labour market performed very strongly in 2025 with employment rising much more strongly than population.
“It is almost inevitable that employment growth will slow in 2026, but the demand for labour appears to have solid underlying support from both stronger household spending and the large ongoing infrastructure build currently in progress,” Hancock said.
“In the medium term, South Australia shares the fundamental challenge faced by the Australian economy – the need to restore stronger rates of labour productivity growth.
“This needs to be done in a way that is consistent with other societal goals, such as environmental protection, equitable distribution of income and opportunity, and the need to strike a balance between Australia’s security interests and realising the gains that come to Australia from international trade, investment and migration.”
Further insights are detailed in the latest Economic Briefing Report prepared by SACES economists.
Key highlights from the Report include:
- Global economic growth in 2025 was stronger than was expected six months ago but is still slow by historical standards. Growth rates in Asian economies, which are especially important to Australia and South Australia, were also generally stronger than expected during 2025.
- The impact of the new protectionism in the United States has been less adverse than was expected.
- Australia’s GDP growth has picked up in 2025 from weak rates in 2024, although it remains quite modest by historical standards. Stronger growth in domestic demand has been a key factor. Export demand has also been quite solid, with services exports particularly strong.
- The rise in Australian domestic spending was largely due to a recovery in household spending, which had been very sluggish through 2023 and 2024. Business investment spending also strengthened.
- Australia’s consumer price inflation moderated through the first half of 2025 but then increased in the second half of the year. There is now an increased likelihood that the Reserve Bank will increase official interest rates to ensure the achievement of its 2 to 3 per cent medium-term target range for inflation.
- The Australian labour market has come off the very strong trends seen in 2024, with employment growth recently falling behind population growth. But by historical standards the labour market remains quite robust, and the unemployment rate currently stands at 4.3 per cent.
- Aggregate spending in South Australia grew strongly through 2025 – well ahead of population growth.
- Household consumption spending picked up from weak rates and dwelling investment grew very strongly. Household income trends have been supportive.
- Government spending also grew strongly, reflecting increases in health outlays and also major capital projects such as the South Road redevelopment and the new Women’s and Children’s Hospital.
- The South Australian labour market showed very strong trends during 2025, and it has thus far avoided the slower employment growth seen for Australia as a whole.
- Looking ahead, SACES expects SA’s gross state product to grow by 2 per cent in 2025/26, underpinned by rising household and infrastructure spending plus a much-improved 2025 winter grain crop.
- SACES expects employment growth to slow from the very strong rates seen in 2025 and to rise by 1.5 per cent through the year to June 2026, broadly in line with population growth.
“The SA economic outlook depends on trends both at national level and overseas,” Hancock said.
“The fundamental challenge at national level is the weak trend in labour productivity trends over the last decade and a half. This limits growth in household incomes in the medium term, and in the short term it also complicates the Reserve Bank’s job of holding inflation down.
“In international markets, South Australia has had some successes. Services exports have increased strongly, and copper has also been subject to strong demand in international markets.
“A return to better seasonal conditions in 2025 will also now flow into improved agricultural exports.”