Shifting the dial on Australian productivity

First 5000 | October 26, 2017

The Federal Government has welcomed the publication of Shifting the Dial, the Productivity Commission’s new, wide ranging report on long term strategies to improve Australia’s productivity.  Before ‘innovation’ became the buzzword in every minister’s speech, successive governments stressed the need to improve Australian productivity, although the public eventually grew skeptical that this masked an agenda to cut wages while increasing working hours, leading to it fading from the political agenda.

The quest for productivity gains in the 80s and 90s saw the gradual overhaul of protectionist legislation, trade liberalisation, tariff reductions, capital market reforms, privatisation of government assets, greater labour market flexibility, competition agendas and taxation reform which laid the foundation for Australia’s quarter century of uninterrupted growth.  However, the momentum for reform has slowed in recent years and the Productivity Commission’s report lays out broad proposals in five areas, including health, education and city planning as well as the economic sphere, to boost Australian performance.  It takes a holistic approach, rather than a purely economic one, in the recognition that all these factors are interlinked and mutually supporting.

It seems obvious that a better educated and healthier workforce should help firms of all size prosper in the future, and that better planning and infrastructure will lay the foundation for a stronger economy.  The Productivity Commission therefore calls for more integrated and patient centered healthcare, a modernised education system to produce more proficient, more resilient and more adaptive students – and therefore workers – and more functional cities that encourage, rather than choke, activity.  Its recommendation for a proper energy strategy is particularly welcome given business complaints over high prices and policy turmoil in recent years.  The report estimates that billions of dollars of economic activity could be generated if these recommendations are implemented in full.

The Commission also advocates more efficient delivery of government services as well as stronger, more competitive market systems. Building on Professor Ian Harper’s economic Review, published in 2015, the new report places the customer at the centre of economic activity, rather than government, firm or service provider.  Commissioned by Prime Minister Malcolm Turnbull last year, the report is the first installment of what is promised to be an ongoing series of five year reviews, offering long term policy guidance in realms where political turbulence has hampered the pursuit of strong policy directions.

Peter Harris, the Chairman of the Productivity Commission, will present the document to State and Territory Treasurers at the Council of Federal Financial Relations meeting on the 27th of October.  While it will offer a foundation for inter-governmental and cross-party cooperation, and a benchmark against which the Commonwealth, State and Territories can mark their progress, its proposals will have to be adopted and progressed across party and state lines to be effective.  Many equally worthy reports have been welcomed in the past and then left to gather dust once the glare of publicity has passed and Australian mid-sized firms will be looking for action, rather than words, on these issues.