Time to embrace ‘growth mindset’, says Productivity Commission chair Danielle Wood

Productivity Commission chair Danielle Wood has called on governments to embrace a ‘growth mindset’ to guide their policy decisions, which would improve material living standards.

Productivity Commission chair Danielle Wood. Picture: Aaron Francis

You can now listen to The Australian's articles. Give us your feedback.

You can now listen to The Australian's articles.

Productivity Commission chair Danielle Wood has called on governments to embrace a “growth mindset” to guide their policy decisions, which would encourage the birth of new businesses and innovation and improve material living standards.

In a presentation to the Australian Conference of Economists in Sydney on Tuesday, Ms Wood said governments should focus on clearing away red tape, which would unleash investment and the dynamism on which capitalism flourishes by allowing “new ideas to be the feedstock of growth”.

“Growth should be the north star for all of us,” Ms Wood said, who urged ministers, officials and businesses to “embed the impetus for growth” in our culture, which was a hallmark of the “Big Bang” reform era of the 1980s and 90s.

Using a Hollywood analogy, Ms Wood said the challenge was “Less Oppenheimer, more Everything Everywhere All at Once”.

Her comments come ahead of a high-stakes gathering next month on how to boost productivity through the findings of five PC inquiries, which will be released within weeks, into the nominated pillars of prosperity, including digital and data technologies and a skilled workforce.

Australia’s productivity has been stagnant for a decade, weighed down in part by the expansion of the care sector, where it’s difficult to measure output quality and quantity and thus gauge productivity performance in the usual sense.

Had the productivity growth rates of the past been sustained, Ms Wood said the average Australian would have been better off by $14,000 over the next decade.

“The cumulative effect of ignoring or downplaying growth in policy decisions has been to drag on our living standards,” Ms Wood told The Australian.

“It’s harder than it should be to start a business, to build things and to innovate,” she said.

“A growth mindset means that governments should weigh the impacts on growth when making policy decisions. This doesn’t mean governments can’t ever pursue policies that conflict with growth but we shouldn’t trade it away easily or lightly.”

Ms Wood said the productivity malaise was a global issue, and could be due to the rise of services, smaller gains from technological changes, the investment strike, and declining dynamism in the allocation of capital and labour to their most productive uses.

She said the nation often tied itself in knots with regulation, making it harder than necessary to build renewable energy projects or to get approvals to build homes.

Rather than simply seeking a “Canberra Fix” to economic problems, Ms Wood said the private sector should also step up by backing innovation and taking risks.

Ms Wood said productivity-based growth since the 60s had led to better lives, with real incomes tripling, people living longer and working fewer hours.

As well, signature market-based reforms, including float of the dollar, tariff cuts and deregulation of energy and transport, were a big factor in the nation’s growth resurgence three decades ago.

Today’s reform challenge was, by contrast, a “game of inches” across a broad range of areas and not just simply about workplace laws and corporate tax.

Ms Wood told attendees at the annual gathering of the Economics Society of Australia that one of the rallying cries for bureaucrats in the administration of US president John F. Kennedy in the early 60s was reflected in workplace posters that said: “What have you done for growth today?”

Rather than productivity policy driven by the Treasurer or Assistant Treasurer, Ms Wood said it was time for every portfolio to shift to a growth mindset.

Jim Chalmers is convening an economic reform roundtable in Parliament House next month, with representatives from business, unions, community organisations and experts such as Ms Wood and Reserve Bank governor Michele Bullock.

After the central bank kept the official cash rate on hold on Tuesday, Ms Bullock said sluggish productivity and high unit labour costs were a factor in the board’s watchfulness about inflationary pressures and wages growth.