New economic analysis from the Business Council shows Australia urgently needs a drastic productivity reform push, highlighting that without a significant turnaround, the 2020s are on track to be the worst decade for Australian productivity growth since modern records began.
The analysis found labour productivity has gone backwards by an average of 0.1 per cent a year for the past six years. This means even if Treasury’s own budget assumption of productivity returning to 1.2 per cent growth in the next few years is accepted, the decade would still average productivity growth of just 0.2 per cent a year.
Indeed, matching the 2010s’ productivity growth rate of 1.1 would require productivity growth of 3 per cent a year for the next four years, a level Australia has not sustained since the turn of the century.
The call to action is clear and urgent.
Business Council Chief Executive Bran Black said business <a href="https://bitcomme.com/got-1000-an-investment-in-spacex-could-be-worth-this-much-by-the-end-of-2027/” title=”Got $1,000? An Investment in SpaceX Could Be Worth This Much by the End of 2027.”>investment was central to lifting productivity, with businesses wanting to invest as much as possible in Australia and ready to work with policymakers to get the settings right.
“The way to start is to cut the cost of red tape by 25 per cent by 2030, reform our tax system to encourage investment, make workplace laws simpler and more flexible, and make it easier for low-risk investment to come into Australia,” Mr Black said.
The reforms are among the priority actions set out in the Business Council’s roadmap for making Australia a Top 10 investment destination, released in August.
The Business Council has long argued that lifting productivity is the key lever for delivering the living standards Australians expect.
“We want Australians to enjoy higher living standards and that means we need more business investment in Australia,” Mr Black said.
“Government policies in tax, workplace relations and regulation impact productivity and have made it so much harder for businesses and the economy to grow.”
“For the past six years Australia has gone backwards on productivity. If we stay on the current path, we‘ll record the worst result since records began in 1960.”
“Unless we turn these results around, Australians will continue paying the price with weaker real wages, greater pressure on the cost of living and lower living standards,” Mr Black said.
The Business Council stands ready to work constructively with the Government on the policy reforms needed to address our poor productivity performance and will continue to put forward practical ideas to deliver higher living standards for Australians.
Figure 1: Labour productivity growth by next decade
