Business confidence is on the up in South Australia.

Before the closure of Holden, pundits predicted high unemployment – doom and gloom – but there’s a string of positive developments which could be game changers.

The state elections resulted in stability.

That’s good – businesses don’t like uncertainty (national politicians please note).

Then there’s news about investments in the South Australia economy.

Announcements about the new fleet of warships to be built in Adelaide and then the Brabham BT62 supercar. Add possible expansion at BHP’s Olympic Dam and Oz Mineral’s Carrapateena site (the second largest copper mine in South Australia). These are significant operations and higher commodity prices help the case for expansion.

West Adelaide now provides 22% of South Australia’s jobs and is doing well. It has $13 billion of projects ongoing or in the pipeline; including, the modernisation of transport infrastructure, the expansion of the airport and developments at Tonsley.

Unemployment is now third best in Australia – a real improvement at 5.6%.

So, confidence is up to June 2010 levels – 50% of businesses in a recent survey expect the South Australian economy to be stronger over the next 12-months*.

And confidence levels are important - businesses simply won’t invest if they are pessimistic.

High Confidence Levels / Low Interest Rates equals good conditions for business investment.

People are busy – and we are seeing this at EGM. Demand for roles across Engineering, Finance and Executive Roles has been strong.

Yet there are issues.

Businesses need to see signs of profit growth before really turning the investment tap on full. Sales and revenue haven’t taken off yet - and cost increases are a real problem:

• Overheads are increasing – costs of power, particularly, with large increases for small businesses. 59% of businesses report that overheads are up over the last quarter alone (1% say they have decreased).

• Labour costs are increasing – unemployment is trending down, and this drives pressure for higher wages. 44% of businesses expect to see wages go up next quarter and 20% say it’s harder to find labour to fill vacancies than in the last quarter.

Overall - full marks on unemployment reductions and confidence level increases but three marks deducted for the cost pressures we’re seeing without much prospect of relief in the short-term.

So, South Australian economy – seven out of ten.

*(See ‘The Survey of Business Expectations: June Quarter’ – Business SA / William Buck).