Productivity ‘best way to grow pie’, say business leaders

Business leaders have called for efforts to boost sagging productivity in a bid to improve the nation’s economic fortunes.

Property developer Harry Triguboff. Picture: Esteban La Tessa

Business leaders have called for efforts to boost sagging productivity in a bid to improve the nation’s economic fortunes.

The recent Federal budget raised concerns about sluggish productivity forecasts forcing Treasury to slice long term economic growth estimates.

Similarly, minutes from the Reserve Bank of Australia’s May 2 board meeting showed central banks have become increasingly worried that flatlining productivity growth would make it harder to achieve the inflation target without higher rates.

Multi-billionaire apartment developer Harry Triguboff told The Australian on Wednesday that productivity has been falling for many years.

“When we talk about future productivity, we must remember that apartments have to be approved which will take an average of one year. Building apartments will take two years so there will be very little available for the next three years,” said Mr Triguboff, the founder of Meriton Apartments, the largest private builder of units in Australia.

“If productivity will not move rents and prices will go up. If the government will interfere with negative gearing more units will be sold and less will be available to rent. Putting caps on rents will have the same result.”

“Wages are rising, but the workforce is dropping also. Of course, higher wages will cause again higher costs, prices and rent. This is because the market is already so very tight.

“We brought foreign workers but we did not get approvals to build. So, the foreign workers have created more demand for accommodation.”

Mr Triguboff, worth $23bn, has long called for faster apartment approvals to ease the housing shortage adding that state and local governments should not impose higher charges on developers.

“Builders are going broke. And when a developer goes broke his subcontractors go broke.”

“These subcontractors may work for other companies who are automatically weakened.”

But billionaire retailer Gerry Harvey, denies there is any problem with stagnating productivity.

“Productivity is very good at the moment, it is not stagnating. ” Mr Harvey told The Australian yesterday.

“You have 3 per cent unemployment at the moment, productivity is fantastic. When unemployment reaches 10 per cent, talk to me.”

Still, HSBC Australia said tackling productivity growth must be a central focus for the federal government.

“For economic policymakers, tackling Australia’s longer-term challenges – such as boosting productivity growth – should be one of the immediate goals. Not only would this help support potential output and Australia’s longer-term growth outlook, it would also likely support a lift in real wages growth,” HSBC Australia chief executive Anthony Shaw said.

“Improving Australia’s productivity and competitiveness is the only way to lift living standards over the medium term – that is, it is the only way to sustainably make the economic pie bigger. We see a few key areas for reform, including advancing trade and migration with global partners.”

BHP chief executive Mike Henry also underlined the value of greater productivity at the world’s largest miner this week.

“Our first focus for growth is to enhance productivity from our existing assets. This is by far and away the largest value opportunity and it’s the one that’s most within our control,” Mr Henry told a banking conference.

The mining boss pointed to its West Australian iron ore business which was designed with an initial capacity of 240 million tonnes a year and was now producing at around 280-290 million tonnes annually.

“That’s all been through a focus on productivity and incremental debottlenecking of the business. We’re now looking at initiatives to grow our production to 300 million tonnes per annum over the medium-term,” Mr Henry said on Tuesday.

Originally published as Productivity ‘best way to grow pie’, say business leaders