Matt O'Sullivan (WA, Liberal Party) Share this | Link to this | Hansard source

For some time now, I've been talking in this place about the lack of action from this government on labour productivity. Labour productivity is a key economic indicator. Positive labour productivity has been responsible for much of this country's recent prosperity. Over the last hundred years, the economic output of the average Australian is up sevenfold, while the hours needed to achieve this have declined. In its recent 5-year productivity inquiry report, the Productivity Commission noted:

Productivity growth—producing more outputs, with the same or fewer inputs—is the only sustainable driver of increasing living standards over the long term. While economic growth based solely on physical inputs cannot go on forever, human ingenuity is inexhaustible.

Two hundred years ago, around 90 per cent of the world's population lived in poverty. Today, it's less than 10 per cent. This inexhaustible ingenuity of the human spirit has, over the past two centuries, seen productivity growth lift millions out of poverty. The use of fossil fuels has objectively been one of the single biggest drivers behind the reduction in poverty, something that the Left can't bring themselves to acknowledge—but I'll park that for now and address that on another day.

The growth in productivity means less time spent producing goods. Equally, it is these goods and services and, importantly, their quality, that have empowered people to live in improved conditions. By any global standard, Australians' living standards have been the envy of the world. However, this is now at risk. Under the Albanese Labor government's watch, the inflation building has been on fire. In fact, this fire has been roaring out of control. To date, the government has blamed everyone for high inflation—the previous government, the Ukraine war, the RBA governor. I'm sure even my chocolate lab at home, Lily, has been blamed. She certainly gets the blame for a lot of things in my house. But the blame for this high inflation lies squarely at the feet of this government. They own it. They are responsible for it. Rather than fixing it, they continue to add to the problem by pouring petrol on the fire—ranging from the reckless May budget to introducing arcane industrial relations legislation that seeks to take this country back to the 1970s, when stagflation was running rife, and widespread industrial action became the norm.

The Prime Minister's silence on labour productivity, frankly, has been deafening. His government does not talk about how to address declining labour productivity. Even worse, trade unions hate us talking about productivity. Their only vision for improving productivity would be to isolate the Productivity Commission or dismantle it altogether. The Albanese government has recently announced the appointment of Wayne Swan's former chief of staff to head the Productivity Commission. It is crucial that the commission does not become a politicised echo chamber of the Albanese government and their union mates. It should be focused on providing advice that will help to improve our economy. This is particularly important at this time, when labour productivity has collapsed by 4.6 per cent in the last 12 months under Mr Albanese. With ever-increasing urgency, the Governor of the Reserve Bank has been sounding the alarm about the need to increase productivity. In a keynote address on 7 June, Dr Lowe observed:

The best way to achieve a moderation in growth in unit labour costs is through stronger productivity growth, which would also underpin durable increases in real wages and our national wealth and make more resources available to fund the public services that people value.

Now, month after month, this government has persecuted the RBA governor as the bogeyman for its economic failings, its own economic failings. In their view, the governor was responsible for the inflation mess it created and just about every other ill that has occurred during this government's time in office. But the RBA has only one tool available to fight inflation—that is, interest rates. The government should be doing more by reining in its own reckless spending, which is further compounding inflation and hurting Australian families. Rather than addressing its own fiscal policy, this government decided the best way to address inflation was to replace the RBA governor.

Back on 23 June 2023, John Kehoe wrote in the Australian Financial Review, :

If pay increases continue to surge ahead of worker productivity, the labour market could adjust abruptly through job shedding.

That is what could happen.

The 3.7 per cent unemployment rate is tipped to jump above 5 per cent by next year.

The out-take from this is quite simple: if the government keeps setting the inflation building on fire then unemployment will rise. There is a link between inflation and the rate of growth in the labour unit costs. In 2022 labour unit costs increased by 7.5 per cent. Wage growth without productivity will lead to further inflation growth. Right now, the government is performing a highwire act with the Australian economy, let's face it. But the highwire act will come crashing down soon enough.

With rampant inflation, high interest rates and a cost-of-living crisis, the government now seeks further market intervention in the market by introducing its tranche of radical industrial relations laws. The dust hasn't even settled on the IR legislation introduced last year and it now seeks to further empower and embolden trade unions' ability to muscle in on the Australian workplace. Yet, through all this madness, the government doesn't talk about productivity. It doesn't say how these new laws will help productivity, nor does it set a path to ensure productivity remains a key lever in Australia's economic prosperity.

Some of Australia's biggest employers are saying this bill that's been proposed, which we will see in the next few months, is a productivity killer. The Business Council of Australia has stated:

At a time when Australia has almost full employment but record low productivity growth, investment retreating overseas and pressures from inflation and interest rates, there is little justification for upending the workplace relations system and creating and compounding uncertainty and costs …

In conclusion, this government likes to govern in slogans, but defeating inflation and improving productivity requires more than one-liner slogans from the minister for workplace relations. Simply fulfilling a trade union wish list is not good economic management, nor is channelling Whitlam-esque economics. As the Australian Financial Review noted on 24 July:

The focus of any workplace relations minister now should be to help entrench a jobless rate of 4 per cent or less as the Reserve Bank seeks to squeeze out inflation, and to help Australia's high-wage economy compete in the global marketplace. That can best be done by encouraging businesses and their employees to co-operate to find ways to improve productivity at the shop-floor level and to share in the gains.

The Albanese government needs to get fair dinkum about addressing productivity. Having a vision to improve our nation's productivity must be included with any discussion that is had about how we tackle inflation. Increasing productivity must be a red line in getting the economy back in order and returning inflation to the two to three per cent band.

The Productivity Commission has give an road map in its five-year review, yet the government has buried it. The Treasurer apparently did not receive a briefing on it. I think he should hang his head in shame on that matter. Real action on productivity deserves more than slogans and lip service. It is essential so the next generation can enjoy better quality of life than the one before.

While trade unions like to dismiss the rationale of good productivity, what they cannot deny is that only increasing wage growth without increasing productivity will further underline prolonged inflationary angst and, therefore, continue the increased cost-of-living pressures that Australians are facing right now. Boy, are they facing them right now!

As a result, Australian families struggling to make ends meet will continue to bear the brunt of this government's economic incompetence. The pressures that they are putting on upward inflation are hurting Australians. We need a government that's serious about addressing productivity so that we can put downward pressure on inflation.

In the early 1980s President Ronald Reagan said:

There's no denying that greater productivity growth is the cornerstone of price stability and sustained economic growth.

This remains a virtue 40 years later.