Kate Chaney (Curtin, Independent) Share this | Link to this | Hansard source

I move:

That this House:

(1) notes that:

(a) in 2023, the Government revised down its annual productivity growth assumption from 1.5 per cent to 1.2 per cent, reflecting the slowdown in productivity over the past two decades;

(b) Australian productivity growth is now behind most comparable nations including the United States, the United Kingdom, Germany and France;

(c) productivity growth is a key contributor to increases in economic welfare, accounting for 80 per cent of growth in real wages; and

(d) contributing factors to the decline in Australian productivity include:

(i) complicated workplace laws, regulation and taxation;

(ii) declining educational outcomes; and

(iii) under-investment in research and development relative to peer economies; and

(2) calls on the Government to issue a formal response to the Productivity Commission's five-yearly productivity inquiry report, Advancing Prosperity, presented in March 2023.

Productivity is about doing more with less, meeting our needs with fewer working hours and fewer resources. It's not necessarily about consuming more goods; in fact, most of our economy and about 80 per cent of our jobs are now in services. But it is about working smarter, not harder, to improve our standard of living. In the last decade productivity growth has been the slowest in 60 years: about 1.1 per cent per year compared to an average of 1.8 per cent for the 60 years before that. Australia has dropped from sixth in the OECD productivity rankings in 1970 to 16. Some sectors are worse than others. Productivity in the construction sector has actually declined about 12 per cent over the past decade. This is partially driven by restrictive work practices and a lack of investment in innovation. This contributes to our housing problem.

There's no sign that productivity will get better without intervention. Last year the government revised down its annual productivity growth assumption from 1.5 per cent to 1.2 per cent, reflecting the slowdown in productivity over the past two decades. This means lower living standards for all Australians and less ability to fund and deliver the services the community expects. We can expect further productivity headwinds, with climate change creating more extreme weather events, geopolitical tensions driving more trade barriers for less-efficient resource allocation and demographic changes driving the need for less productive care services. For a long time, every generation has expected to be a bit better off than the one before, but this is no longer true.

There are lots of factors that affect productivity. Much of the industrial world is facing similar challenges. Despite technology changes over the last 15 years seeming pretty radical, they are not translating to greater growth the way railroads and indoor plumbing did. It's harder to achieve productivity growth in services, and, as we get richer and older, services, including care, make up more of our economy.

Many of these factors are outside government control, but we need government to take a long-term perspective and pull all the available levers to ensure productivity growth so that young Australians can look forward with the same optimism as previous generations. With little genuine economic reform for 25 years, we've relied heavily on increased demand and prices for our commodities rather than adding to our economic complexity or focusing on productivity.

We are overdue for a broad tax reform discussion to ensure our tax system is fit for purpose for the next generation. Depoliticising tax reform will be key, and we need appropriate and trusted institutions to contribute to this. Luckily, we already have the Productivity Commission, so it's important that we actually listen to and respond to its advice. Government needs to be held to account when it comes to recommendations from independent experts. As taxpayers, we all pay for them, so we should be making the most of their advice.

The Productivity Commission does a five-yearly productivity inquiry and presented its last report, Advancing prosperity, in March last year. This report is 1,000 pages long and provides 29 reform directives. On education, there are recommendations about the use of technology, access to best-practice resources, innovative school models, lifelong learning and student transitions to work. On migration, there are recommendations about better targeting the skilled migration system and reducing qualification barriers faced by skilled migrants. On Workplace Relations, there are recommendations about simplification and modernisation. Technology -related recommendations include internet access, cybersecurity, government data use and better diffusion of new knowledge, especially in the care economy. Business dynamism could be improved through competition tax, trade and regulation reform. Looking to the government's own activities, the report says infrastructure should be subject to cost benefit-analysis, health funding should incentivise innovation, and data and foreign expertise should be used to drive best-practice service delivery. When it comes to decarbonising, climate risks should be disclosed on property sales, adaptation-related infrastructure should be subjected to cost-benefit analysis, the safeguard mechanism should be expanded to cover the whole economy and the integrity of carbon offsets should be improved. These are all worthy recommendations.

To show that it's serious about tackling Australia's productivity challenge, I call on the government to publish a formal response to the recommendations in the Productivity Commission report and commit to implementation. Voters are genuinely interested in leaders who take a long-term view, and this is a great opportunity to demonstrate a commitment to looking beyond an election cycle.

Bridget Archer (Bass, Liberal Party) Share this | Link to this | Hansard source

Is the motion seconded?

Allegra Spender (Wentworth, Independent) Share this | Link to this | Hansard source

I second the motion and reserve my right to speak.

Daniel Mulino (Fraser, Australian Labor Party) Share this | Link to this | Hansard source

Nobel Prize winner Paul Krugman once said:

Productivity isn't everything, but, in the long run, it is almost everything.

This does reflect the fact that we need to focus on productivity growth if we're going to lift living standards in the long run and if we're going to put ourselves in position to deal with some of the first-order challenges that our society faces. To that extent, I agree with some of the underlying sentiments of the motion that has been put before us today.

Productivity is absolutely key to our economic agenda and more broadly. As the previous speaker, the member for Curtin, alluded to, productivity is important in many ways. Firstly, multifactor productivity growth is critical to ensure that we get more out of an existing set of inputs. It's also obviously critical to innovation. It's important not just that we get more outputs out of a given set of inputs but that we actually create new outputs and new services. That's why it's so important to look at the context in which this government assumed office after the last election. We came to office after a decade, leading up to 2020, in which productivity growth had been the lowest it had been for over 60 years—1.1 per cent compared to 1.8 per cent over 60 years leading up to 2019 and 2020. Indeed, the trajectory of productivity growth was so bad that productivity growth had fallen for five consecutive years in the lead up to the pandemic.

Right from the beginning, this government has seen turning around productivity growth as absolute central. But, as almost all macroeconomists would agree, turning around productivity growth takes time. There's typically a lagged effect between investing in the economy, changing regulation and seeing productivity growth come through in the statistics. We will see that again this time, but this government has invested in a range of important policy reforms that will pay off in important ways. Indeed, to make reference to the PC reform agenda that the previous speaker alluded to, many of the government's priority areas for reform overlap with those areas identified by the Productivity Commission. So I want to talk on the five pillars that this government has used as a frame for its productivity agenda. I won't have time to run through all of the various components, of course, but these will point to the fact this government is turning productivity growth around and that it is doing so on a very broad basis.

The first of those pillars is that we need a more dynamic, competitive and resilient economy, and if I might say—somewhat self-indulgently—the committee I chair, the House economics committee, looked at this in great detail. Some of the recommendations that came out of our competition and economic dynamism review are now coming to fruition—reforms of mergers laws, reforms in relation to non-compete clauses. There are others in this chamber who signed up to some of those recommendations. I think those recommendations will have a real impact to strengthen and streamline approval processes and remove 500 nuisance tariffs. There are significant number of reforms already underway being implemented in the parliament at this very time, which will have a significant effect on productivity.

There was a range of reforms right from day 1. Indeed, some of the very first laws passed by the parliament in this term related to the skilled and adaptable workforce, which is the second of the five pillars: university reforms, fee-free TAFE, and a record investment in skills. Many of these reforms are about fairness, but they are also about productivity. There are also number of reforms in relation to the third of the five pillars: harnessing data and the digital economy, expanding the NBN into digital areas, and a range of digital apprenticeships. That's something that I am seeing in my own electorate. There's investing in the net zero transformation, which is something many in this chamber at this point in time would agree with. That is critical for protecting our environment and society but will also have productivity benefits. Then there's the ageing population and care economy, which is a huge and growing part of our economy. We have put in place a number of reforms through the NDIS and its sustainability through more aged care services at home.

This government is turning productivity around. It does take some time for it to come through in the official statistics, but it will be reflected in the statistics, because we have reforms right across the economy and our society. This will benefit us in terms of both our quality of life and our economic statistics.

Allegra Spender (Wentworth, Independent) Share this | Link to this | Hansard source

Australia prides itself on being the lucky country, the land of the fair go, but since the end of the mining boom, Australia's economic certainty has been less self-assured. We're not making the businesses and innovation that will drive the next golden era of growth. Business investment is down, particularly in non-mining sectors, where it has fallen from nine per cent of GDP to four per cent of GDP over the last 30 years. As a result, Australia has had the worst decade for productivity in the last 60 years and Treasury has downgraded our long-term productivity assumption.

Productivity is the key to growing prosperity and living standards. Over the last 40 years, productivity growth has been responsible for 80 per cent of real wages growth—not to mention that, in a cost-of-living crisis, boosting productivity is the only sustainable way to both lower prices and increase real wages. And people are noticing this gap in productivity. Only eight per cent of the country, according to a recent Redbridge Group poll, believe that the standard of living in Australia will be better for the next generation. This is unprecedented. At the heart of this is our failure to address productivity. We need strong economic reform to drive productivity. While I respect the contribution that the government has made in this term, it is nowhere near enough. When I speak to businesses and I look at the productivity report, there are four key areas: we need reform of the tax system, we need to make it simpler to do business, we need to ramp up innovation and we need to make our tax dollars work better.

Firstly, on tax: with the last major reform of our tax system introduced in 2000, nearly one in three Australians have never seen a substantial change to the way that tax is collected. In that time, the shape of our economy has transformed and our society has fundamentally shifted. We need reform in the tax system, both to avoid taxes that distort the economy, such as stamp duty, and to create a tax system that incentivises the changes we know we want to make, such as increasing investment in our economy, as well as boosting aspiration and work.

Secondly, we need to make Australia the best place to start and grow a business. Every government promises to cut red tape but underdelivers. We're adding greater regulation—we're very good at that, in this House, but we are not very good at removing it. I speak to medical researchers who spend a quarter of their time writing grant applications, childcare workers who spend less time with the kids because of their burden of paperwork, and clean energy companies waiting seven years for a windfarm approval.

Part of this also relates to the industrial relations burden on businesses, and policy setting that has become overly politicised in this country, swinging like a pendulum depending on who is in power. Research conducted by the e61 Institute shows that it has led to perverse outcomes on business decisions, including driving casualisation in the workforce and an increase in capital investment instead of investment in people. In the construction industry alone, productivity has declined by 18 per cent on a per-hours-worked basis since 2012. We need genuine review of workplace settings and an increased threshold at which these laws apply, particularly in terms of the effect on small and young businesses.

Thirdly, we need to ramp up innovation. Australia is a more challenging place for companies to go from startup to scale-up relative to our peers. On a per capita basis, Australia has half the early-stage investment funding available compared to the UK, and around a third compared to the US. This is despite having the third-largest pension scheme in the world. We've come a long way in this last decade, but data from the Reserve Bank of Australia shows that it is international investors, not domestic, who are doing the heavy lifting. The proportion of early-stage investment made from superannuation has declined from 60 per cent to 30 per cent in the last decade. This has several causes, but, principally, we need to look at: RG 97; Your Future, Your Super; and some of those incentives around early-stage investment, as well as how we make sure that contracts—particularly government contracts—are also open to young, innovative Australian firms, so they can bring the best of world-class innovation to Australia, not just overseas.

Finally, government is responsible for around 40 per cent of spending in this country and, frankly, government spending is a major drain on our productivity growth. This has to be an area of greater scrutiny, making our tax dollar work better. I think the place to start, time and time again, is infrastructure spending. We spend billions of dollars a year in this space, but we are losing $30 billion at the current rate on cost overruns.

So, finally, I urge the Treasurer and the government to come back to us honestly about the Productivity Commission's report on advancing prosperity and tell us which ones they're going to back, because these policy settings are not nice-to-haves. If we do not get this right, the economic opportunities that we took for granted won't be available to our children.

Sam Rae (Hawke, Australian Labor Party) Share this | Link to this | Hansard source

I share the concerns the member for Curtin raises in this motion regarding productivity growth. But I respectfully disagree with the motion's description of some of the drivers. I think the long-term realisation of productivity growth in our country will come down to a range of complex and interrelational factors that will play out over the long term.

When the Albanese Labor government came to office, productivity had already been in freefall for a considerable period of time. In the June quarter of 2022, productivity experienced the largest quarterly decline in 45 years—a staggering 2.4 per cent drop. And over the previous decade productivity growth fell to its slowest rate in 60 years, averaging just 1.1 per cent annually. This was of course no accident. It was the direct result of deliberate policy choices by the coalition—choices that suppressed wages, undermined job security and ignored the need for investment in the skills and industries of the future of our economy.

This government believes in a different approach. We understand that investing in workers is not just about fairness; it is also key to lifting productivity and driving sustainable economic growth. When workers are paid fairly, when their jobs are secure and when their workplaces are safe and supportive, they are healthier, happier and more productive. Fair wages and secure jobs reduce turnover, saving businesses the cost of recruitment and training. Workers who have access to paid leave, manageable hours and safe working conditions perform better and innovate more effectively.

By investing in workers, we're investing in the foundations of a strong and resilient economy. The Albanese government's commitment to this principle is reflected in our workplace relations reforms. We're ensuring that all workers have access to minimum standards and that wage growth is not just a hope but a reality for all workers. We're supporting collective bargaining, creating pathways to secure employment and addressing longstanding inequities such as the gender pay gap. Unlike the opposition, who prefer to pit workers against one another in a race to the bottom, the Albanese Labor government are focused on lifting everyone up.

Improving productivity is not just about policies for today. It requires a forward-looking strategy that ensures that the workforce is equipped for the challenges and opportunities of the future. That is why our government has made skills and training a cornerstone of our economic agenda. By expanding free TAFE and increasing support for apprentices in critical industries such as construction, aged care and clean energy, we're building a pipeline of skilled workers who will drive growth and innovation. Investing in skills directly addresses one of the most significant barriers to productivity. When businesses cannot find workers who have the right expertise, projects are delayed, costs rise and economic opportunities are lost. By equipping workers with the skills they need to excel in high-demand industries, we're ensuring that businesses can operate at full capacity, take on new challenges and adapt to a rapidly changing local economy.

By breaking down barriers for women in traditionally male dominated trades we're also expanding the talent pool, ensuring that industries can access the best and brightest minds, regardless of gender. This not only strengthens workforce participation but also fosters diversity, which has been shown to improve problem solving and innovation within teams.

Australia's economic success also depends on creating an environment where businesses can thrive. This includes reducing compliance burdens by abolishing unnecessary tariffs, streamlining environmental approvals and modernising merger regulations. We're also fostering investment in emerging industries where Australia has a natural advantage, such as renewable energy, advanced manufacturing and critical minerals.

This government understands that better pay and conditions are not just good for workers but also good for our economy. Fair treatment of workers leads to better retention, higher engagement and greater innovation. These are the building blocks of a productive and prosperous society. However, rebuilding productivity after a decade of neglect will take time. It will take more than one term of government to undo the damage caused by those opposite. But we are making progress. Business investment is now above levels seen during the mining boom. And we're creating the conditions for long-term sustainable growth.

Improving productivity is about shaping an economy where the efforts of workers, businesses and industries are translated into tangible benefits: higher wages, stronger economic growth and better living standards for all Australians. The Albanese Labor government is focused on addressing the structural challenges that have held Australia back for far too long. By targeting the root causes of sluggish productivity and prioritising strategic long-term investments, we are working to ensure that the benefits of a stronger economy are felt by all Australians.

Marion Scrymgour (Lingiari, Australian Labor Party) Share this | Link to this | Hansard source

The time allotted for this debate has expired. The debate is adjourned, and the resumption of the debate will be made an order of the day for the next sitting.