Josh Frydenberg wants productivity on states’ agendas

Treasurer Josh Frydenberg wants productivity back on the states’ agendas.

Federal Treasurer Josh Frydenberg. Picture: AAP

Federal Treasurer Josh Frydenberg has written to his state counterparts advising them that the next State-Federal Council meeting in October will be devoted to productivity reform.

The move will be highlighted in his speech this morning to the Business Council of Australia.

Mr Frydenberg has noted 22 of the 28 recommendations from the Productivity Commission’s “Shifting the Dial” report centred in measures which invoked state governments.

Former Productivity Commission boss Peter Harris had urged the government to lead reform via individual Ministers, particularly in health, education and transport, rather than through the Co-Ag process.

He argued being on the Co-AG agenda was the death of any major reform.

Mr Frydenberg’s speech is intended to show the government’s commitment to productivity reform. But it comes two years after the government received a copy of the landmark Productivity Commission report and it has so far done little to advance the reforms.

Prime Minister Scott Morrison spoke glowingly about the report but has done little about it. Time will tell whether Mr Frydenberg does any better.

But action is clearly needed.

The speech stays well clear of specific new investment-boosting initiatives, which business is seeking and avoids any industrial relations reform.

The speech comes after the BCA has urged action from the federal government.

As reported this morning, Mr Frydenberg will also use the speech to the BCA to tell its members to start moving on productivity enhancing investment.

Last year Australian companies returned to shareholders $29 billion in dividends or buybacks, compared to $12 billion in the previous four years.

Mr Frydenberg will remind business this money could be used on investment to grow companies and increase productivity.

Companies argue that the money is returned to shareholders if it cannot be profitably invested so the argument becomes a classic chicken and egg debate.

Companies want a better investment climate and the government wants more investment

The speech will also stress the Government’s commitment to productivity reform through more flexible labour markets and other measures.

But the speech is unlikely to detail new investment allowances like that proposed by the ALP in the last election and will instead note the government’s instant asset write off program.

The speech will be used to explain just why productivity growth has slowed noting the reasons centre on slowing capital deployment which is the amount of capital each worker has to use.

In Australia this growth has slowed from 0.9 to 0.6 per cent, below the OECD average.