Households will be poorer and living standards lower from a weakened economy unless urgent action is taken to address Australia's lagging productivity and improve competitiveness, a major new report has found.
The Business Council's Australia's flagging competitiveness and productivity report has found Australia is becoming a harder place to attract investment, which in turn is impacting the country's ability to be more productive and grow the economy.
The Report also found productivity growth, which is currently at an annualised rate of 0.5 per cent, would need to quadruple to around two per cent each year to 2030 just to match our performance last decade, which is the weakest in 60 years.
Business Council Chief Executive Bran Black said productivity growth over the past decade was the weakest in six decades and urgent action is needed.
"Unless Australia's productivity performance is drastically reversed, our high living standards will be put at risk and that means lower economic growth and lower wages," Mr Black said.
"The past decade saw our living standards grow at their slowest rate since the Great Depression in the 1930s, and unless we turn it around the next decade could be even worse.
"Plain and simple, if we can't get productivity moving, we won't see sustained real wages growth, and it will be harder to control inflation and enable the Reserve Bank to bring down interest rates."
In its simplest form, productivity means doing more with less. Productivity is a measure that defines how efficiently our economy is working. It underpins strong economic growth and is critical to maintaining living standards. The Reserve Bank also considers productivity growth in its interest rate settings.
The BCA's report outlines that reforms in the following areas are critical to lifting productivity:
- Streamlining and removing regulatory red tape to make it easier to do business
- Reversing recent workplace laws that are a handbrake on productivity growth
- Undertaking education reforms to enhance workplace skills and capabilities
- Reforming our taxation system to better support business investment
- Supporting increased research and development along with the uptake of new technologies.
Mr Black said the gap between the current productivity rate and the rate Australia needs to reach should alarm every government in the country.
"Productivity growth needs to be supercharged to around two per cent each and every year to 2030 just to match our performance last decade."
"The feedback I get from members is that Australia is becoming a harder place to invest, and this is a trend we need to reverse if we want to boost productivity, keep jobs and grow our economy."
The Business Council has called for a National Reform Fund, to incentivise states and territories to pursue change that drives growth. This includes undertaking stamp duty reform and cutting cumbersome regulation and red tape holding back business activities.
"Treasurer Jim Chalmers's recent announcement of a National Productivity Fund is a significant step in the right direction, and the key will now be in implementation and achieving scale," Mr Black said.
The BCA remains concerned that recent workplace law changes drive down productivity, and argues that new laws like multi-employer bargaining and amendments to intractable bargaining provisions
should be ripped up.
"We need to seriously examine how recent industrial relations changes are thwarting productivity growth and holding us back," Mr Black said.
"Changes like multi-employer bargaining have taken our workplace laws back to the 1970s and threaten our ability to invest and innovate."
The most recent Intergenerational Report assumes that annualised productivity growth to 2030 will be 1.2 per cent, which is more than double the current annual rate of 0.5 per cent.
The following figures show the productivity gap (figure one) and the fall in gross real disposable income in Australia (figure two).
Figure one: Labour productivity growth by decade
Figure two: Real gross disposable income per capita of households
