Productivity ‘can be 2020’s silver lining’

Productivity Commission chair says the accelerated adoption of digital technologies could lift us out of our productivity slump.

Productivity Commission chairman Michael Brennan. Picture: James Croucher

Productivity Commission chair Michael Brennan has said the ­accelerated adoption of digital technologies by households and businesses through the corona­virus pandemic could be the “spark” that lifts the country out of its productivity slump.

Mr Brennan, one of the Morrison government’s chief economic advisers, said on Friday that if the nation used “the disruption of COVID-19 to put ourselves on a different path — one of experimentation, risk-taking and ongoing technological adoption” — then that would be “2020’s great silver lining”.

On Monday morning, in a speech in Melbourne, Reserve Bank of Australia governor Philip Lowe echoed those thoughts, ­saying “investing in data and our digital capability are critical to our future prosperity”.

Dr Lowe also noted that the pandemic had accelerated the trend to online, with many businesses “making more progress on the digital front in a matter of months than they would have made in years”.

Mr Brennan also said that the working-from-home trend through the pandemic was emblematic of the changes wrought by health restrictions.

The Productivity Commission estimates that 40 per cent of jobs in Australia can be done remotely. That compared to census data which, prior to 2020, suggested only 5 per cent of workers ­actually did so.

Mr Brennan told The Australian the “jury is out” on whether the working-from-home trend would prove to be productivity enhancing in an aggregate sense, but that the increased flexibility around workplace arrangements would be of lasting benefit to some employers and employees.

“There is early evidence that many firms and workers perceive that it may be at least neutral or positive,” he said.

How many workers eventually return to the office in coming years remains an open question, but Mr Brennan said that the prevalence of those working from home “almost certainly can’t go back to pre-existing levels”.

Despite the ubiquity of digital technologies such as mobile phones and the internet in our everyday lives, these transformative advances have not translated into heightened productivity to the same extent as previous advances, such as electricity, motorised transport, antibiotics and clean running water.

Productivity growth in Australia averaged about 1.5 per cent since the 1970s, but slowed to half that in the five years on average to 2018-19, and was actually negative in that financial year.

Mr Brennan said it was “a possibility” that COVID could be the trigger that unleashed the, so far, unrealised productive potential of digital technologies.

“There is evidence of a bring forward in the uptake in digital technology,” he said.

“This could be a one-off step change, or it could be the spark that stimulates a higher growth rate of innovation and technology change — and we need it to be that to restart higher productivity rates.

“It requires it (the accelerated uptake of digital technology) to be the beginning of an ongoing process of innovation.”