The South Australian Opposition says a drop in the number of new homes will have flow-on effects throughout the state's economy.
The Opposition says Bureau of Statistics (ABS) data shows housing construction fell by 20 per cent in the 12 months to September last year.
Opposition treasury spokesman Iain Evans says low interest rates should be encouraging home buyers and construction should be accelerating.
"Interest rates apply right across Australia not just in South Australia but South Australia is the worst performing state by a long way," he said.
"The building industry is one of the big multipliers of economic activity within the state.
"The lower number of houses simply means the lower number of tradesman are needed so there's less employment.
"There's less sales through things like hardware stores and suppliers." Mr Evans says State Government grants of up to $8500 for home buyers could reverse the trend.
"Certainly we hope for the industry's sake, and for employment's sake, that those policies have an effect.
But you'd have to ask the question why they waited so long to implement them." Treasurer Jack Snelling says a different set of ABS figures shows building approvals increased in the five months to last November.
"We've had consecutive months of improvements in new dwelling starts," he said.
"Obviously, it's taking a little bit of time to kick in but I think what it shows is that the new housing construction grants that the Government announced late last year, or last year, are beginning to bite." The news comes after the latest unemployment figures showed a jump from 5.3 per cent to 5.8 per cent in South Australia.
Employment Minister Tom Kenyon conceded the manufacturing sector is struggling with the higher Australian dollar but says other parts of the economy are performing well.
"I think if the dollar remains high, then obviously manufacturing is going to find it difficult, or continue to find it difficult," he said.
"That's exactly why the government's implemented its advanced manufacturing strategy, it's to get that high-value manufacturing going in the state.
"Underneath the disappointment of the Olympic Dam announcement, mining is still going strongly.
Commodity figures have risen in the last few months and that's been reflected."