The state and its leading politicians are in something of an economic policy rut along with the rest of country

This year has represented something of an economic ''annus horribilis'' for South Australia.

In August BHP Billiton spectacularly shelved its $30 billion Olympic Dam copper-gold-uranium mine expansion plan, the subject of sensitive development approval negotiations over many years.

For the domestic audience BHP Billiton CEO Marius Kloppers cited factors such as falling commodity prices and a high Australian dollar as reasons for the mine project cancellation.  However, there is little doubt that other factors were pivotal in the decision.

In particular, the carbon tax, rising labour costs attributable to the industrial relations system and drawn-out regulatory approval processes also conspired to make Olympic Dam an economically-unviable proposition.

The state's unemployment rate, in trend terms, has been on the upward march all year, with 47,400 people languishing on the dole queue in November 2012 alone.

Then, in mid-September, the bad news continued with credit ratings agency Moody's downgrading South Australia's credit rating.

Citing a combination of elevated government spending and less robust revenue growth, Moody's castigated the state's loose fiscal policies, which are likely to see Budget deficits and rising debts dragged out further into the future.

And now state Treasurer Jack Snelling has released the government's mid-year Budget review, unveiling an updated Budget deficit figure of about $1.2 billion for this financial year.

The Treasurer has been quick to cry foul over revenues growing less than previous projections, and hopes that the new parking tax hit will be part of the Budget repair solution, but he should cast his glance away from his State Revenue Office and towards the line departments.

This is because the horror mid-year Budget result is, in fact, testimony to many years of state overspending under the watch of line agency ministers, and the government's general inability to rein in spending to accommodate slowing revenue growth.

If the credit agencies again downgrade the South Australian credit rating in light of this latest reporting on the state of the Budget, it means the government will face even higher costs associated with its already heavy borrowings.

So it seems the state and its leading politicians are in something of an economic policy rut, with the rest of the country — admittedly with their own economic problems — viewing SA with either pity or bemusement.

But rather than dwell on the negatives, as serious as they may be, South Australians should grasp the opportunity to seriously think about the future of their state and recalibrate public policies accordingly.

As the weight of history in Australia and internationally illustrates, economies grow most strongly when the private sector is accorded with greater freedoms to produce goods and services for the benefit of their customers.

In a world of capital and skilled labour mobility, what this means is that the costly and often economically ruinous interventions by government should be reduced, ensuring that market participants receive greater returns from their economic ventures.

So what priorities could South Australians consider to get their economy back on track and their government right-sized in the interests of making the state the best place to live, work and invest?

Could SA take a leaf out of the tax-cutting experience of Queensland during the Bjelke-Petersen years, with the aim of making the state the lowest taxing state in Australia?

Should the creeping regulations of the regulatory state, which imposes substantial financial costs and delays upon investment projects, be substantially cut back to encourage business development?

What about the role of state and local governments when it comes to spending?

Are there reform opportunities available to privatise government assets to allow the private sector a greater role in capital works development and maintenance, saving taxpayers money in the process?  When seeking to answer such questions, South Australians could benefit from considering regional economic success stories from around the world.

For example, Texas continues to buck the trend of tepid economic growth and out-migration along America's east and west coasts by offering low taxes and an efficient regulatory climate to encourage new investments and job opportunities in the Lone Star state.

In Canada the provinces of Alberta and, more recently, Saskatchewan have undergone a process of economic reform focused on repairing their government budgets and reducing relative government size, providing renewed confidence for its burgeoning local oil and gas sectors.

South Australia has a proud history of economic performance, being the traditional home to the likes of iconic company News Limited and a world-class wine industry today, and with some potentially solid advantages such as a minerals bounty in its favour.

While the existing challenges facing the state economy are significant, genteel decline is by no means desirable or inevitable.

Indeed, there is no better time to leave 2012 behind and put in place the building blocks for South Australian economic reform and renewal than the 2013 new year.

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