Craig Emerson (Rankin, Australian Labor Party, Shadow Minister for Service Economy, Small Business and Independent Contractors) Share this | Hansard source

Today’s productivity growth is tomorrow’s prosperity. As eminent economist Paul Krugman points out:

Productivity growth isn’t everything, but in the long run it’s nearly everything.

Indeed, our own Productivity Commission has estimated that productivity growth has been responsible for virtually all the increase in national income in our country since the mid-1960s. But productivity growth is not just about the mighty dollar. Productivity growth allows us to take more leisure, to achieve that balance that we seek between work and family life. Productivity growth gives us the resources to provide opportunity for all through a decent education for our young people. And productivity growth also allows us to achieve higher environmental standards.

The problem is that Australia is in a productivity slump. During the 1990s Australia experienced a productivity miracle built on the reform program of the previous Labor governments—the Hawke and Keating governments. The consequence of that reform program designed to lift productivity growth was record-breaking productivity growth of 2.6 per cent per annum, which made us one of the very fastest growing countries in the world in terms of productivity growth. But the reform program has not been continued by this government, and we are already beginning to pay the price. This decade, productivity growth has averaged 2.1 per cent per annum, down from that miracle rate of 2.6 per cent. Since 2003, instead of even 2.1 per cent, we have had just one per cent per annum of productivity growth. And in a little-noticed manoeuvre in budget forecasting in the midyear budget review, the government quietly downgraded the forecasts of productivity growth for Australia over the forward estimates period to 1¾ per cent.

The fact is Australia is losing ground against the United States and the OECD in productivity growth. We have already lost most of the gains that were made during that miracle decade of the 1990s. US productivity growth is projected to exceed two per cent per annum over the next few years. For Australia, officially, productivity growth has been downgraded to 1¾ per cent. That does not seem like a big difference—between two or 2¼ per cent and 1¾ per cent—but the fact is small differences in productivity growth matter a lot over the long term. In fact, if Australia’s productivity growth were just a half a percentage point higher—that is, comparable to the US figure—then Australia’s national income in 40 years time would be 20 per cent higher. So it matters a lot. Yet the Intergenerational report formally adopts an assumption for productivity growth of 1¾ per cent, which has now been confirmed by Treasury in that midyear budget review. What would that mean for Australia’s growth in living standards from the end of this decade onwards? That forecast productivity growth, with the ageing of the population, would mean the slowest rate of growth in income per person in Australia from 2010 onwards since the decade of the Great Depression.

The fact is the government has run up the white flag when it comes to the productivity challenge. The Reserve Bank has said to us that we will now have to get used to economic growth rates with a two in front of them, compared with, in recent periods, a four or even a five. So the government has surrendered on the productivity challenge. If we think that 1¾ per cent might be adequate, do you know what China is achieving in productivity growth per year? Seventeen per cent per annum! And the Australian government is accepting 1¾ per cent per annum.

The trouble is that the Treasurer will not even acknowledge that Australia has a productivity problem. He said on 1 November in this parliament that labour productivity in Australia is ‘at, or marginally ahead of, the last productivity cycle’. So if we have a Treasurer of Australia who does not recognise that there is a problem, how on earth are we going to get this government to implement any solutions? This is a reform-lazy government. It is a government that refuses to invest in Australia’s future. But, of course, Labor does have a plan to lift productivity growth to sustain prosperity into the future. In January, Labor leader Kevin Rudd unveiled the education revolution so essential to lifting productivity growth in this country. And yesterday he and Senator Conroy and the member for Melbourne outlined our broadband plan.

Let us find out what the government thinks about broadband and productivity growth. A report from the government’s own agency titled Forecasting productivity growth 2004 to 2024 says:

Broadband will help to raise business productivity through wider diffusion and better quality services in e-commerce, e-banking, e-government, e-education and e-health.

Government departments understand the importance of it, but the Treasurer does not. Why is the United States expected to outperform Australia on productivity growth in the coming few years? The Productivity Commission released a report just a couple of weeks ago and it tells us the answer. US optimism is based on these factors:

... the likelihood of ongoing rapid technological advances in ICT manufacturing; accompanying rapid price declines, diffusion of technologies ... and continuation of the pace of efficiency improvement elsewhere in the economy as firms continue to find new and more-productive ways to apply new technologies.

That is a long way of saying broadband. It is a long way of saying that the US expects to outperform Australia on productivity growth because it will implement a whole range of new information and communication technologies, which find their life through fast broadband. But the government just does not get it.

How does Australia fare in relation to broadband? On broadband take-up Australia ranks 17th in the OECD, but today in question time the Prime Minister said that Australia has the second highest take-up of broadband in the OECD. That is completely untrue—we are ranked 17th. The Prime Minister said Australia has the second highest take-up in the OECD. Before the Hansard is manipulated, let us make sure that is on the record, because that is what he said and he is wrong. On bandwidth, Australia is ranked 25th in the OECD. That is why Labor yesterday announced Labor’s national broadband network, which will deliver high-speed broadband to 98 per cent of Australians.

Obviously, that will have huge benefits for small businesses. How? Much faster speed—that is, 12 megabits per second, which is very fast by international standards—means that small businesses will be able to make much greater use of information and communication technology solutions, such as better inventory management, for example. It is not good practice to have a whole lot of inventory on your premises. When you make a sale, if you have information and communication technology, that can then trigger a purchase for another item. That is the efficient, modern way of doing business. That cannot easily be done without fast broadband. Small businesses will benefit through better business practices and through better communication and marketing so that they can tell people the goods and services that they have available.

The fact is, figures just released the other day confirm that half of all small businesses in Australia fail within two years of being established. We should do everything we can to support small businesses, to give them that broadband facility, to give them that competitive edge, to ensure that as many of those as possible can survive. Independent contractors and home based small businesses would be huge beneficiaries from fast broadband. Having those facilities at their homes allows them to operate efficiently from home without having to have an office somewhere else and also allows them to balance work and family life, which is pretty important. Small businesses and independent contractors would be huge beneficiaries from Labor’s program.

But this morning the Treasurer said—and it was asserted here again in parliament at question time—that this was always going to happen anyway. But Telstra and the G9 proposals applied only to five capital cities. We have the Minister for Agriculture, Fisheries and Forestry here, a member of the National Party, and again we have a situation where the National Party is only concerned with the cities. What about with the bush? What about provincial Australia? What about regional Australia? The minister and other ministers are happy that the proposal would only apply to five capital cities. Represent your constituents, Minister; represent them.

In addition, the proposals that have been on the board would require major regulatory changes. Where are they? Has the government agreed to make those major regulatory changes? No, it has not. It was not just going to happen anyway, as the government continues to assert. On this question of Labor’s announcement, let us hear from the CEO of Optus, Paul O’Sullivan. He said last night:

Today is a very significant step forward because what you have is a recognition of the need.

The minister laughs because he dismisses the CEO of Optus. He said:

I think all of the groups now, the political parties, Telstra, the industry are all agreed on the need. What we are now moving into—

under Labor’s proposal—

is how we achieve it, and today you have the endorsement of some key principles that the G 9 have been outlining, that is that we can have broadband and we can have competition and that it is important in the national interest to get both.

Yet the minister at the table, the Minister for Agriculture, Fisheries and Forestry, today described Labor’s proposal as anticompetitive. So you have the CEO of Optus saying this is procompetitive, and the minister arguing quite the contrary, that it is anti-competitive. Phil Burgess from Telstra—the minister is laughing again; they are obviously the enemies of Telstra; there is no doubt about that—said:

For too long, backward-looking regulation has locked Australia into old technology, creating the broadband drought that now afflicts consumers, businesses and communities around Australia.

A broadband drought, Minister, under your guidance, under your sloth, under your complacency—

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