Ideas to kick-start growth, Treasurer? Here are five

The Oxford English Dictionary has announced its new words for 2025, which include the very Australian “goon bag”. But if you follow Australian politics, it’s a different word that’s been front and centre of late: productivity.

By now it’s no secret that productivity growth has been flagging. We’ve come out the other side of the COVID shock with productivity where it was in 2016.

Illustration Credit: Matt Davidson

That’s why the treasurer has made productivity his economic policy priority for the term. In August, he is hosting a reform roundtable to advance new ideas to kick-start growth.

This is a welcome and important development. Productivity is the secret sauce for improving our living standards. Put simply, productivity is about getting more out of our working hours. As the value of our work increases, our incomes and living standards grow.

Over time the effects are transformative. Thanks to productivity growth, the average Australian has three times the income and five hours a week more leisure time than the average Australian in 1960.

So how can an economic reform roundtable help solve our productivity problem?

It starts with the guest list. Productivity affects all of us, so the roundtable will bring together business groups, unions, the community sector, state and territory representatives and experts to work towards agreement on the things that governments can do to drive growth.

Government policy can affect productivity in a range of ways. Governments support the things that enable growth such as research, education and training, and health. They can influence incentives to work and invest through taxes and regulation. Governments are also major funders and providers of services, accounting for about 25 per cent of Australia’s economy.

So we can expect the roundtable conversation to be wide-ranging. And that’s as it should be: to shift the dial on productivity, governments are going to have to move across a range of policy fronts. Productivity reform 2020s-style is less about a single iconic reform and more about making improvements all over. In movie parlance, less Oppenheimer and more Everything Everywhere All at Once.

Treasurer Jim Chalmers has made productivity his economic policy priority for the term.Credit: Alex Ellinghausen

As a participant in the roundtable, here are just a few of the things I’ll be raising.

First, we can’t talk about productivity without talking about the immense potential of new technologies such as artificial intelligence. On some measures, Australia is lagging in adoption. It is critical that our regulatory settings in everything from privacy to industrial relations address the risks without putting unnecessary roadblocks in front of business adoption.

Second, we need to address the creep of red and green tape and make regulatory processes more efficient. Businesses spend more time on compliance than a decade ago, and the time taken to build everything from houses to green energy has blown out. Governments need to streamline regulatory processes in these areas. But we also need more ways to kick the tyres on regulations and their costs to counterbalance the incentive to regulate away every new problem.

Third, we need to continue to improve access to skills and education. Australia is a services-based economy, which makes “human capital” critically important for our productivity. This starts with ensuring teachers are well-equipped to give students the skills they need for further learning.

Part of that is about curriculum materials and lesson plans – teachers have access to a huge range of resources, but we can do more to ensure they all have access to the best ones. Another aspect is educational technology. AI-powered educational technology tools are in their early stages, but they show a lot of promise. Government can help make sure teachers and students around the country share in the benefits.

Government can also provide better supports for lifelong learning. Ongoing education and training – whether in the workplace or through formal programs – can help us upskill and adapt as technology and the economy evolves.

Fourth is supporting improvements in productivity in the rapidly growing care economy. Care services are labour-intensive; traditionally, productivity gains have been harder to come by. But new technologies provide some opportunities – robots that clear dishes and push around laundry in aged care are my favourite examples. But there are also opportunities in reforming systems – for example, helping health providers work together to meet the needs of their local areas.

And fifth is tax reform. Most know that our tax system is complex. But it is also economically costly: we collect too much tax from inefficient sources and not enough from more efficient bases. There are a range of reforms that could be contemplated: replacing inefficient stamp duties with broad-based land taxes, income tax reforms that wind back concessions in return for reducing tax rates, or reforms to introduce more direct road user charging to better reflect the costs of road use and vehicle emissions. One reform I will put on the table is changing our corporate tax system to create sharper incentives for businesses to invest and expand.

These are just some of the priorities identified in the Productivity Commission’s forthcoming reports to the government. I’m delighted to have the chance to raise them at the roundtable. Our work shows that if governments can rediscover their reform mojo, they can make a difference to productivity and economic growth. And that’s worth talking about.

Danielle Wood is the chair of the Productivity Commission.

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