Good and Bad News in a Musk-Do State

It was always going to be difficult to compete with Elon Musk. Early positioning by the tech giant cemented Tesla as the frontrunner for construction of the state government-initiated 100-megawatt battery for South Australia. In Twitter banter with Australian billionaire counterpart Mike Cannon-Brookes, Musk said that he would build the facility within 100 days or it’s free. It was an audacious move, a masterstroke of marketing and positioning.

Apparently Tesla was one of a long list of bidders keen to build the battery, not surprising given it was the largest project of its kind undertaken in history – three times larger than anything else, Musk would later say. The bold play by Musk and Tesla paid off. At a joint press conference in Adelaide, a jubilant Premier Jay Weatherill announced Tesla and French company Neoen were the successful bidders. What made this an extraordinary occasion was the presence of Musk, a rockstar of the tech world, guaranteeing the world’s eyes would be on Adelaide, not just for a day but for months to come. Setting the challenge of delivering within 100 days (after regulatory approvals were given) was bound to ensure this.

The Musk spectacle was political manna from heaven for the Weatherill Government. Musk catapulted the government’s energy plan onto the global stage. He presented it as bold, not without risk though, but absolutely essential. For its part, the state government was seen to act assertively in its mission to improve grid stability ahead of next summer.

Meanwhile, Whyalla was spared the devastation that the closure of Arrium would inflict on the mid-north steel town. Sanjeev Gupta’s London-based Liberty House Group has been announced as the successful bidder. He is at the head of an empire with deep pockets and strategic intent. They have been buying steel industry assets while they are relatively cheap, betting on an improvement in global steel prices. In the meantime, they plan to invest around $1 billion upgrading the plant. All of this augurs well for the future of steel manufacturing in South Australia.

With solutions to the energy crisis on the way and the Whyalla steelworks in safe hands, 2017 is turning out to be a better year for South Australia than many expected. All going well, the opening of the new Royal Adelaide Hospital on September 5 should be another cause for celebration.

But then we have to face the closure of GMH on October 20.

Between now and then, expect to hear a string of announcements about the expansion plans of South Australian companies benefiting from state and federal government assistance and defence and infrastructure projects. Investments in the recent state budget along with a thawing of state/federal relations will combine to help soften the blow. They will boost jobs growth at a time when it is urgently needed. Whether it will be enough is difficult to say, probably not, given the scale of the closure and South Australia’s anemic full-time employment growth.

In any case, we won’t really know what the full impact of the automotive closure on unemployment is until April/May next year, when the loss of jobs and investment starts to show up in the monthly ABS Labour Force Survey results. All eyes will be on these between now and then.