Productivity growth in Australia has fallen to its lowest level in 60 years, averaging just 1.1 per cent annually.
The new figures are part of the Productivity Commission’s report, which Treasurer Jim Chalmers says confirms “Australia has a productivity problem”.
In a speech on Thursday, the treasurer was quick to blame his predecessors for low growth, saying Australia had just emerged from a “lost decade”.
“In the medium and long term, our success will be determined by whether or not we can raise living standards – and that, in turn, will be determined by whether we can put the lamentable productivity performance we have seen during the lost decade behind us,” he said.
Productivity is a measure of how much the goods and services produced in Australia increase over time and can be affected by technological improvements, workforce skills and management practices, and changes in capital stock.
Boosts in productivity growth are seen as a driver of long-term improvements in living standards, according to the Productivity Commission.
The trend has seen Australia drop ten places in productivity rankings, falling from sixth to 60th in the Organization for Economic Co-operation and Development from 1970 to 2020 according to Dr Chalmers, and is now 22 per cent lower than the US.
If productivity remains at current levels, the report predicts that future income will be “40 percent lower and the work week 5 percent longer.”
Dr. Chalmers will release the entire 1,000-page report on Friday.
But he said in a letter to CEDA that the areas Australia needs to address in order to boost productivity are “complex” and will not respond to “whack-a-mole policy making”.
One of the biggest issues is the growing service sector and the care economy, which has averaged zero productivity growth since 2000 and “will naturally expand and impact productivity as our population ages,” according to Dr Chalmers.
The move towards net zero by 2050 is also indicated in the report, with the move requiring billions in investments.
“This will help us avoid some of the worst impacts of climate change by creating new sources of growth that will raise our productivity performance over time,” said Dr. Chalmers.
The treasurer also hinted at what was to come in the May budget, saying “restraint” and “cost of living relief where we can afford it” would be the guiding principles behind the decision.
“It’s not going to be easy or quick,” he said, “but together, we can start to change it systemically.”
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