Kym Richardson (Kingston, Liberal Party) Share this | Link to this | Hansard source

My question is addressed to the Treasurer. Would the Treasurer inform the House of the findings of the OECD employment outlook 2007? What does this indicate about the relationship between employment and productivity, which he certainly knows something about? Are there any other views?

Peter Costello (Higgins, Liberal Party, Treasurer) Share this | Link to this | Hansard source

I thank the honourable member for Kingston for his question. I can inform the House that in the last 24 hours there has been another abysmal failure on the part of the opposition leader to come to grips with productivity. I would recommend to the Leader of the Opposition the old adage: ‘If you are in a hole, stop digging’—because the more he digs, the more trouble he gets into. For example, he went on Radio National today and, in an attempt to prove that there had been a decline in productivity, he combined the ABS findings on labour productivity for the market sector with the IGR findings and assumptions on productivity for the total economy. They are two completely different measures. The market sector is much more easily measured because you measure it by output, but in the total economy you have areas like the Public Service, where it is very difficult to measure output. So the cycles of market sector productivity as reported in the national accounts are different to those for total productivity which are used for long-term assumptions in the IGR.

But I do not hold the Leader of the Opposition entirely responsible for this, because when I went back to read the document that had been prepared for him by Tim Dixon, John O’Mahony and Ankit Kumar, I found that they had not themselves actually made that distinction in the 10-page briefing. Whilst I am dealing with this document, I should say in passing that it is worth recording that the Leader of the Opposition was vehemently protesting yesterday to journalists that this document had been stolen from the Labor Party, but there was one problem: the cameras had him leaving it in a public place and then demanding his staff go back and find it. I suppose he thinks it was stolen from him by his staff. That is another example of a Leader of the Opposition who always blames everybody else for his weaknesses. The document was not stolen or taken by the coalition. The camera does not lie: this document was lost by the Leader of the Opposition and him alone. It was lost in just the same way as his credibility was lost when he went on AM on 14 June. People in this House will know that I am very interested in and am counting down to ‘fundamental injustice day’, 30 June. Well, we have just passed fundamental incompetence day, 14 June, when the Leader of the Opposition went on AM

Honourable Members:

Honourable members interjecting—

Peter Costello (Higgins, Liberal Party, Treasurer) Share this | Link to this | Hansard source

Even the member for Lilley thought that was a good one. He is enjoying the joke as much as I am.

As if on cue, the OECD yesterday came out with an important piece of research which is on the correlation between increasing employment and productivity. What it finds—

Wayne Swan (Lilley, Australian Labor Party, Shadow Treasurer) Share this | Link to this | Hansard source

Mr Swan interjecting

Peter Costello (Higgins, Liberal Party, Treasurer) Share this | Link to this | Hansard source

I would ask the member for Lilley not to interject. Every time he interjects, I think of that old Al Jolson song, ‘Swanee—how I love ya, how I love ya’! Here is what the OECD reported on the correlation between more jobs and labour productivity:

There is a negative correlation—

listen to this—

between employment growth and average measured labour productivity growth, which suggests that evaluating the success of employment enhancing structural reforms by measuring labour productivity can be misleading.

What it is saying here is that, as you pull more people into the workforce as unemployment falls, particularly if you pull in people who are unskilled, because they are unskilled, rather than meeting the overall productivity of the workforce, they tend to have a negative effect. And they have a negative effect on the overall productivity of the workforce until such time as they have been in the workforce long enough to improve their skills, to move up to the averaged measure and eventually to increase it. That is why there is a negative correlation between increasing employment and labour productivity. In particular, the correlation is negative when unemployment is low and when, by definition, you are pulling into the workforce people of lower skills than you would be in the immediate aftermath of a recession, when you would be soaking up people who had been more recently put off.

This is what the OECD finds:

However, any slowdown in average measured productivity resulting directly from a change in employment is to a large extent a statistical artefact and does not imply that individual productivity has fallen. Its implications for policy evaluation therefore are not immediately obvious.

Why do I mention that? Because anybody who thinks about it for a moment knows that, when you are pulling long-term unemployed into the labour market when unemployment is falling, people who do not have the same level of skill when they join the workforce will not have the same level of productivity. They will get it after years in the workforce. When you are pulling people off welfare and into work, they do not have the average productivity of the rest of the workforce. That is why the OECD says that, by pulling those people into employment, as a ‘statistical artefact’ you get a negative impact on labour productivity.

Does that mean we should not pull them into the workforce? Does that mean we should say, ‘Keep the long-term unemployed out of the workforce,’ because we do not want to change our labour productivity figures? No, of course not. We want to bring those people into the workforce. We want to give them an opportunity in the general economy. We know it will have that effect, but we also know that over a period of time you will get a much stronger economy as a result.

Those people who pull out these ‘statistical artefacts’ and try to make them a political point when they have no understanding of what they are talking about cannot be trusted with the Australian economy. They are not humane; they are not people who have the interests of the unemployed at heart. They are political charlatans.