Key Points
- The Productivity Commission has released its latest five-yearly report.
- The 1,000-page report makes 71 recommendations to advance prosperity in Australia.
- Mining and agriculture has made Australia wealthy, but there's been more demand for services such as childcare.
Kickstarting reform in essential services like education and health has been highlighted as a key focus for Australia to shore up its future prosperity.
In a major, , the Productivity Commission listed improving access to tertiary education, bolstering the integrity of carbon offsets and using train and bus fares more strategically among 71 ideas to get sluggish productivity growth moving.
Labour productivity is defined as output per worker or per hour worked. The economic indicator contributes to higher wages and stronger economic growth.
The Productivity Commission said improving education, one of five areas of reform, was crucial to getting ahead after Australia's productivity growth slumped to its slowest rate in 60 years.
Over the decade to 2020, average annual labour productivity growth in Australia was the slowest in 60 years, falling to just 1.1 per cent compared with 1.8 per cent over the 60 years to 2019-20. Source: Supplied / Productivity Commission
Climate change and Medicare identified as reform areas
The commission called on the federal government to double down on its "demand-driven model" for providing Commonwealth-supported places to domestic university students to better align courses with skill needs.
Several recommendations focused on driving reforms in the public service.
These include running a more rigorous cost-benefit analysis over major projects to avoid cost blowouts and delays, and using procurement to drive innovation in healthcare and human services.
For example, the commission recommended an annual rolling review of selected services subsidised by Medicare to ensure funding was only going to treatments that were deemed clinically effective.
Adapting to climate change and achieving net zero at least cost has also been flagged as a high-level objective.
Call to move away from occupation-based lists in employer-sponsored migration
The commission backed the as the best way to drive down emissions and recommended progressively tweaking it to cover a wider range of sectors.
Several recommendations were levelled at workplace relations laws, with the commissions calling for a renewed focus on awards.
Reforms to Australia's migration system also featured, with the commission urging a move away from occupation-based lists towards wage thresholds as the basis for employer-sponsored migration.
There are also several recommendations aimed at boosting competition and dynamism across the economy, including reforming planning and zoning regulations so they are not "unduly restrictive" and moving towards a nationally consistent road user charging system.
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Australia has a "productivity predicament", according to the commission, with productivity growth slowing over the last 20 years as it has in much of the developed world.
The authors note that while some sectors have experienced enormous productivity growth - resulting in dramatically cheaper and better products - others have been slower, including many service sectors.
The commission says productivity improvement in services is hard as these industries are labour-intensive, often delivered in-person and not suitable for mass production.
"Future productivity growth in Australia relies crucially on getting better productivity across the services sector," the report says.
Not all recommendations will be implemented
Treasurer Jim Chalmers said not all of the report's recommendations would be implemented but most aligned with his government's values and priorities.
"There'll be some conflict with our priorities and values, but overwhelmingly, the directions and the themes set out in the report today are areas that we're interested in and that we're progressing," he told ABC Radio on Friday.
"We've got these big shifts in our economy, these big trends and transitions. And we haven't taken full advantage of that."
Mr Chalmers said on Thursday that without a lift to Australia's labour productivity, Australians would be working for two more hours a week to maintain their current standard of living.
Addressing the Committee for Economic Development of Australia (CEDA) in Brisbane, he said Australians would also be earning incomes that are 40 per cent lower if productivity growth doesn't improve.
Employer groups urge action
The Australian Chamber of Commerce and Industry welcomed the report and urged the government to implement the recommendations.
"If Australia stays on its present course, and fails to kickstart productivity growth, future incomes will be 40 per cent lower, and the working week five per cent longer. We simply cannot allow that to happen," said the group's CEO, Andrew McKellar.
"Australia has slipped behind other nations, down ten places in the OECD's productivity rankings in the five decades to 2020. It’s time to arrest that trend."
Business Council chief executive Jennifer Westacott said not acting on the report's recommendations would be a mistake.
"Faster productivity is the ticket to higher sustained wage growth for Australians. But, on our current path, we risk stagnation," she said.
"Today’s Productivity Commission report will take time to work through, but it is a critical blueprint for a more dynamic and productive economy that can deliver the living standards and opportunities Australians expect."
