Australia faces a daunting productivity challenge

Treasurer Jim Chalmers at The Australian-Melbourne Institute Outlook conference on Wednesday. Picture: Arsineh Houspian.

What is becoming clear very quickly post-budget is the sheer size of the task to lift productivity in Australia. Without that lift, the Albanese government will not be able to deliver on its ambitious social policies unless it either taxes or borrows from current or future generations.

Jim Chalmers rightly acknowledges that his budget is sculpted around the inflation challenge of our time. But that budget is already in the rear view mirror.

Looking forward, the government has big policy decisions to make in energy, industrial relations, female participation in the workforce and the National Disability Insurance Scheme.

Labor policies have shifted the dial on emissions targets, on wages and on the broad women’s agenda – and this is long overdue for many Australians. Responsible implementation of those policies is the hard part.

Take energy. At the The Australian-Melbourne Institute’s Economic and Social Outlook Conference, Dr Chalmers stressed he wanted the competition regulator to consider a price cap on gas prices in its review to be complete in haste over the next fortnight.

In response, Australian Competition and Consumer Commission chair Gina Cass-Gottlieb said the regulator would look at prices as one option to deal with soaring home energy bills, but acknowledged that the option could threaten longstanding LNG export contracts with near neighbours in Asia.

The predictable result is that the tough call on a gas cap will be put back into the government’s court.

In budget week, the government rushed through its industrial relations legislation paving the way for multi-enterprise bargaining. The risk here is real – wage increases on the way across the economy, productivity increases missing in the debate.

There has been a Clayton’s effort by the government to focus wage increases to low income sectors like aged care or child care

Those looking to the Fair Work Commission to hose down gratuitous industrial action should remember this is the same FWC that endorsed the Better Off Overall Test that froze bargaining.

The government is also tasking the ACCC with a review into childcare with a sensible focus on making sure the taxpayer dollars spent on the sector are not siphoned off to vested interests in the sector rather than benefiting the consumer.

More accessible childcare is important to allow women the choice of greater participation in the workforce. But will it lead to a productivity uplift as Labor hopes? A report on Wednesday by Deloitte Access Economics in partnership with Australians Investing in Women found that more flexible ideas around gender would unlock $128bn each year in the economy and generate 461,000 jobs. There are big numbers.

If anything, said Productivity Commission chairman Michael Brennan said he saw all Australians choosing to work less over time and not more.

As to the NDIS which is carving a disturbing deep structural furrow through the budget’s forward estimates, the government is yet to be prescriptive on a solution. Suffice to say it is far easier to axe a few commuter car parks than it is to deliver tough love in response to the rising demands around mental health.

Where Michael Brennan and Deloitte’s Dr Pradeep Phillip agree is that the biggest lift in productivity could come from the services sector, much of which is in government hands. Measuring productivity in this space is fiendish because desired outcomes are not all about widgets but also about consumer experience. Perhaps this is a good place for the government to get started with to get some runs on the board.

Productivity growth has been revised down from 1.5 per cent to 1.2 per cent.