Limited incentives: Pedestrians pass the Australian Securities Exchange in Sydney. After winning a majority in parliament, Prime Minister Anthony Albanese’s government is positioned to take the hard steps economists have called for to ignite growth. — Bloomberg
SYDNEY: Australia’s Productivity Commission (PC) has identified 15 priority reforms to examine in the course of five inquiries it’s conducting for the government to try to boost economic efficiency and raise living standards.
Productivity growth is at its “lowest ebb in 60 years”, said Danielle Wood, chair of the commission, highlighting the urgent need to tackle the issue. Australia’s long economic expansion has dulled enthusiasm for politically risky change, leading to calls for a renewed reform agenda as the economy begins to sputter.
“Productivity growth isn’t about working harder or about having more stuff,” Wood said. “It’s about making the most of what we have – the skills and experience of our workforce, new technologies and our resources – so we can get more out of our economy.”
Tackling productivity is challenging as it often involves difficult change that only pays dividends in later years – offering limited incentives to politicians with the truncated horizon of a three-year parliamentary term.
Corporate leaders have been among the most vocal in demanding action on productivity even though business has often failed to improve its own efficiency levels.
Over the past decade, Australia’s economy grew by 25%, but gross domestic product (GDP) per capita has risen just 7.7%, largely due to weak productivity.
Bloomberg Economics expects it will take until 2027 for GDP per capita to exceed its June 2022 peak.
“The lack of productivity gains has meant that GDP growth has been reliant on population growth and increases in per-capita hours worked,” Bloomberg economist James McIntyre said in a recent note.
He pointed out that commodity price gains have helped mask some of the impact of poor productivity outcomes by boosting Australia’s national income.
However, US President Donald Trump’s tariff programme threatens to cloud that source of revenue.
“With major disruptions to global trade, further increases in national incomes could be harder to come by,” McIntyre added.
“A return to productivity growth will be needed to keep nudging up living standards.”
The PC said it’s seeking input on areas such as changes to corporate tax, reducing the cost of meeting carbon targets and speeding up approvals for new energy infrastructure, according to a statement.
The PC also wants to improve students’ results and boost prevention in the care sector.
The reform areas aren’t recommendations, Wood said. Rather, they are a starting point for research and consultation to ensure the upcoming recommendations are “robust and implementable”.
The five inquiries being conducted are:
Consultation on the reform areas under each of the inquiries is open until June 6 and the respective interim reports will then be delivered through July and August, the PC said.
It will conduct further consultation to inform the final inquiry reports that will be delivered to the government in December. — Bloomberg
