"The consequences of Australia's deteriorating productivity are being felt right across the economy. Unsustainable wages growth, cost-of-living pressures, stretched public budgets and weakened industrial competitiveness are the result of our productivity weakness. Policymakers urgently need to demonstrate the will to turn things around," said Innes Willox, Chief Executive of the national employer association, Australian Industry Group.
"Productivity growth averaged 1.2 per cent a year in the decade before the pandemic, but since 2020, it has limped along at just 0.2 per cent. That is not a blip – it is a structural decline that touches every part of the economy, from construction and manufacturing to healthcare and education. Both the Reserve Bank of Australia and Treasury have already downgraded their long-run productivity assumptions and economic forecasts as a result.
"The causes are multiple and the solutions must be too.
"Regulatory burden is one of the most corrosive forces holding us back. In the care economy, construction sector and across our supply chains, fragmented and overlapping rules are consuming resources that could otherwise drive innovation, workforce development and service quality.
"Business taxation is also working against us. Australia's effective company tax rate is the second highest in the OECD, deterring the foreign investment we need in clean energy, advanced manufacturing and technology.
"A nationally operating business faces over 100 taxes across federal and state jurisdictions. That is not a system designed for productivity – it is a system designed to turn businesses into compliance machines.
"Our ports and freight networks tell a similar story. Stevedores have increasingly pivoted their profit models away from competitive shipping-line business toward captive landside charges on trucking operators – with terminal access charges far outpacing actual capital investment. Operating profits have reached record highs, not because of improved productivity but because of unchecked market power.
"On workplace relations, the avalanche of legislative changes in recent years has focused on delivering secure and better-paid jobs, but has largely ignored whether those outcomes are actually sustainable. Productivity cannot be legislated into existence – it has to be earned through workplaces that are empowered to innovate, bargain genuinely and reward performance.
"None of this is insurmountable. Australia has lifted productivity before, and the policy levers are well understood. Our submission to the Select Committee on Productivity outlines some sensible recommendations:
"We need the political will to pull these levers and improve productivity, which then means higher living standards and wages for every Australian," Mr Willox said.
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