FEDERAL Treasurer Peter Costello suggests the economy has been fireproofed against global instabilities – so can an era of low inflation, low unemployment and economic growth be sustained well into the future? The problem is that many strategic challenges facing Australia are often obscured by naïve, self-congratulatory economic boosterism. We should celebrate our strengths and successes but should do so in the context of a sober analysis of how to better manage our vulnerabilities.

The economic summer will soon pass; storm clouds are gathering on the national and state horizons. Economic booms don’t go on forever, particularly when driven by property speculation and unsustainable levels of household debt. All of this threatens to end the strong economic and jobs growth enjoyed in Australia over recent years. The beginning of the downturn in housing and construction activity and the grim prospect of Daimler-Chrysler closing Mitsubishi have the potential to create economic and social havoc in South Australia. Let's hope both these outcomes don’t transpire – but let us also face the possibility.

These and other issues, such as the Federal Government's role in industry and employment development, should be occupying the minds of those attending the State Government’s second Economic Summit.

Last year, about 280 South Australians gathered at Parliament House for the inaugural Economic Growth Summit, where they considered 72 recommendations contained in a draft report from the Economic Development Board. The summit released a communiqué broadly endorsing the EDB recommendations. Three months later the State Government announced that it had adopted 70 of the recommendations for implementation.

The first summit was a bold and exciting initiative. It was the first time in recent history that a Government has actively sought to engage South Australians in thinking about economic policy directions. A public space was created for debate about strategic alternatives. The process offers the prospect of developing a more coherent vision and a sophisticated strategic planning framework for the State.

Since the first summit, the Government has acted on many of the recommendations finalised in the EDB's Framework for Economic Development in South Australia report. This includes the establishment of a Venture Capital Board with $10 million to foster the development of a venture-capital industry in SA. An Office of Infrastructure and Minister for Infrastructure have been established to develop a more co-ordinated and more robust approach to infrastructure development and investment. There also seems to be a growing level of acceptance within the State Government that the EDB was right to suggest that borrowing is a legitimate means of funding infrastructure. It now needs to act on this.

The EDB called for a major overhaul of the former Department of Industry and Trade, arguing that it should be substantially restructured and downsized. Under the Brown/Olsen administrations, the economic and industry portfolios were at loggerheads, reflecting the political rivalry that existed between the two former Liberal premiers. This tension paralysed economic and industry policy development within the Liberal Government. When Labor came to office in 2002, it established the Office of Economic Development, which was later absorbed into a larger Department of Business, Manufacturing and Trade (DBMT).

Acting on the EDBs recommendations, the Labor Government conducted a review of DBMT. The review found that the Department could be characterised as a number of “... fiefdoms with a lack of clear and consistent leadership and direction”. It recommended significant organisational change, including reducing department staffing by 50 per cent. The department is a shadow of its former organisational self, operating with significantly fewer resources and staff. There was a need for a review, as there was evidence that the organization had become sclerotic and rudderless. It was necessary to reform the provision of industry assistance programs to make them more transparent and to avoid using them to fuel bidding wars with other states to attract companies.

However, reductions in staffing and resources in the Department of Industry and Trade appear to be motivated by a desire to achieve budgetary savings more than a need to achieve organisational clarity and effectiveness. The State Government needs to invest in revitalising a demoralised DBMT workforce. This means recognising talent where it exists and seeking it out where it does not. Above all, it means building a sophisticated policy analysis and development capacity within OED, to provide high quality advice to Cabinet and the EDB.

The EDB's call to respond to slow population growth and the impact of demographic change has the State Government developing a population policy and a workforce development strategy. The latter is supported by a modest workforce development fund of about $400,000. While the State Government appears to be taking population and workforce development issues seriously, the resources allocated to translating ideas into action will have to increase substantially to avoid labour and skill shortages. This needs to be done in conjunction with the Federal Government.

While there has been some broadening of the membership of the EDB, more needs to be done to ensure a better balance between business and other community interests. The Rann Government risks accusations of sycophancy by its traditional supporter base if it appears to be overly reliant on the business community for economic advice.

It is doubtful the major organisational changes and staff reductions in DBMT have been driven by a clear concept of what the State Government's appropriate industry development role might be. We should move beyond promoting SA as a low-cost destination for business investment unless we want to become Australia's sweatshop. Higher levels of public investment in our social and physical infrastructure will attract new private investment and re-investment without threatening living standards.

The Economic Summit provides an opportunity to deepen civic engagement in SA, to help build a more prosperous future for all South Australians. Those attending the summit should be aware of the struggles of SA’s homeless, unemployed and underemployed people. A true measure of the success of any economic policy is the extent to which we reduce these hardships and offer rewarding opportunities to participate fully in community life.

In considering policy options available to SA, the Economic Summit should be mindful that the State’s future is heavily influenced by national and international, economic forces beyond our direct control. The rate of economic and employment growth in SA is profoundly influenced by the value of the Australian dollar, tariff protection, interest rates and Federal Government economic and social policy settings. For this reason, much of our thinking about economic strategy must be focused on influencing the policies of the Federal Government. For too long SA has suffered, without adequate compensation from the Federal Government, the adverse effects of tariff reduction on our manufacturing industry. The advantage we have enjoyed, of relatively low-cost housing, is being rapidly eroded by Federal Government policies that fuel the sale of our public housing stock and promote frenzied property speculation.

At this second summit a more robust debate about external pressures, policy options and strategic opportunities would be sign of political maturity.