We risk falling behind without decisive action to reform productivity, Business Council of Australia says

Australia has an opportunity to grow strongly into the future, but without decisive action we’ll continue to coast, and perhaps falter, the Business Council of Australia says.

Australia has relied too heavily on a few key imports such as iron ore to bolster the bottom line, the Business Council of Australia says.

Australians could be $10,000 better off over a decade if we fix our productivity problem, but the reality is we’ve been happy to “coast along in the middle lane” propped up by a handful of key commodities, the Business Council of Australia says.

If we continue to do so, the likelihood is we’ll slip into the “slow lane” BCA chief executive Jennifer Westacott says, while delivering a challenge to the businesses and policy makers of the nation, saying we’ve done little in the past 20 years to reform and modernise the economy.

The BCA’s Living on Borrowed Time discussion paper, to be released on Wednesday, paints a picture of a nation which is little changed from two decades years ago, when the first Intergenerational Report was released.

“Nearly 20 years ago the first Intergenerational Report warned of the costs to our long term futures if Australia just coasted along,’’ Ms Westacott said.

And coast we did, the BCA says.

“Two decades on, our failure to tackle the obstacles holding us back has left the nation out of pocket from where it could have been,’’ the report says.

“That’s the ultimate opportunity cost we all pay for inaction.

“It’s why people don’t feel they are getting ahead - their wages growth has flatlined and it’s harder for young people to buy their first home with average house prices now more than five times average incomes.’’

The discussion paper says that it now takes an average worker seven years to increase their pay by $100 a fortnight.

“In the past, workers were getting that size pay rise every year or two’’, the BCA says.

Australia’s largest companies also remain virtually unchanged from 35 years ago, while in the US the top five companies - Apple, Microsoft, Amazon, Alphabet and Facebook - are all new entrants coming from the knowledge economy.

We need more Amazons, not just Westpacs, BCA says. Pictured in Amazon founder Jeff Bezos.

In Australia the only new entrant to the top five is CSL, coming in fourth, after Westpac, Commonwealth Bank and NAB, with BHP in fifth position.

And we are “too heavily reliant on a few key commodities and need to diversify our industrial base’’ the discussion paper says.

“Unless we make some big shifts to meet our challenges and regain our appetite for reform, our economy and living standards are going to be stuck in the middle lane and we risk sliding backwards,’’ Ms Westacott said.

“The consequences are real for people: slower wages growth, fewer opportunities, and the country will fall further behind it competitors.’’

Ms Westacott said it was “simply unacceptable’’ that one in 20 Australian children experience poverty, and our students are falling behind other nations educationally.

The discussion paper follows the latest Intergenerational Report, released by the federal Treasury on Monday, which painted the picture of a nation which will be running budget deficits for the next four decades, hampered by an ageing population and ballooning health costs.

The report assumes growth in labour productivity of 1.5 per cent, but notes that “this will require an improvement over recent performance’’. The broader economy is forecast to grow at 2.6 per cent over the next four decades, compared with 3 per cent for the past four.

The BCA says Australia can grow faster than 3 per cent, and has identified key areas for reform, including diversifying the industrial base, actively building a low-carbon economy, boosting the skills of the workforce and rebuilding public sector finances.

The BCA will hold a forum to address the various issues raised by the report at a forum at the end of July, bringing together “some of Australia’s most influential policy and decision makers’’.

Ms Westacott said a comprehensive plan would be produced following this forum and incorporating feedback from across the nation.