Craig Thomson (Dobell, Australian Labor Party) Share this | Hansard source

On behalf of the Standing Committee on Economics, I present the committee’s report entitled Inquiry into raising the productivity growth rate in the Australian economy, together with the minutes of proceedings.

Order that the report be made a parliamentary paper.

Over the past decade Australia’s productivity growth has slowed considerably Average annual labour productivity growth fell from 2.1 per cent in the 1990s to around 1.4 per cent in the 2000s. And even though Australia’s average annual productivity growth has performed relatively well in OECD comparisons since 1985 approximating the OECD average—and ranking 12th, one below the US—the productivity growth rate has, however, been in decline since the 2003-04 productivity cycle with growth rates averaging negative 0.2 per cent per year. Put simply this is not good enough for an ageing population like ours in Australia.

An increased productivity growth rate would mean a larger economy, higher living standards and a reduction of the fiscal pressure created from ageing. If we were to boost productivity growth from an average of 1.6 per cent to two per cent per year and sustain this over 40 years real GDP per person would be around 15 per cent higher. That is equivalent to raising living standards by $16,000 a year in today’s dollars by 2050 for every man, woman and child in Australia. This is an exciting prospect, especially when put in the perspective of how healthy productivity growth helped us previously. Productivity growth was responsible for 80 per cent of the increase in our incomes over the last 40 years.

In tabling the report today of the House of Representatives Standing Committee on Economics, I look at some of the reasons why boosting productivity is the key to economic recovery and growth. As the Intergenerational report told us earlier this year, Australia faces a complex mix of long-term challenges of an ageing and growing population, escalating pressures on the health system and an environment vulnerable to climate change. These challenges will place substantial pressures on Australia’s economy, living standards and government finances over the next 40 years. These are challenges affecting not just us but developed countries around the world.

Productivity enhancing reforms particularly through nation-building infrastructure and improving the skills base will grow the economy, improve living standards and partly offset the fiscal pressures of ageing. By growing the economy, we increase our capacity to meet the fiscal costs of ageing without increasing the overall tax burden on working Australians. The best way to grow the economy is to maintain our focus on productivity and on investing in skills and infrastructure such as nation building, the education revolution and regulatory and tax reform to underpin productivity growth in the decades to come. Building productivity, of course, is not just a challenge for government. Ultimately, it is Australian workers and businesses that will deliver the higher productivity by skilling themselves up, tooling up and working smarter.

This report provides a high-level overview of the recent status of productivity growth in Australia and probable mechanisms that could be used to improve the current flagging growth rate. During the course of the inquiry the committee received evidence on a range of issues including measurement of productivity, productivity growth trends in Australia, challenges associated with raising the rate of productivity growth and how governments can promote productivity growth in the economy.

The committee has recommended: the government introduce a national aggregate productivity growth target for the medium term to 2030; a national productivity forum including governments, business, unions and non-government organisations be convened; the Council of Australian Governments adopt a specific national productivity agenda; the Productivity Commission undertake modelling on the effect of human capital investment on Australian productivity growth; the Australian Bureau of Statistics investigate alternate ways of measuring multifactor productivity in the services sector; cost-benefit analysis be mandatory for all policies aimed at increasing aggregate productivity growth and any national productivity agenda should include public sector service provision.

In conclusion, it is fair to say that Australia is without doubt off the pace when it comes to growth and productivity. We have been that way for some time now. Allowing such a slowdown in productivity growth, and even negative productivity growth, for much longer will cause our nation’s standard of living to decline. We need to increase productivity growth to the levels that will bring Australia back to sustained economic growth. We need all levels of government and the community to work to achieve this.

On behalf of the committee, I would like to thank all of the organisations and individuals that participated in this inquiry, particularly those who made written submissions or gave evidence to the public hearing. I would also like to thank the secretary and the staff. Without their help this report would not have been able to be made. (Time expired)

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