Former Victorian premier John Thwaites says a circular economy is key to lifting productivity

A push to a greener and sustainable economy will help to boost weak productivity in Australia and at the same time drive a jobs boom, John Thwaites says.

The productivity of Australian workers and businesses could be significantly improved by making the economy greener and sustainable, while helping to tame inflation at the same time says former Victorian deputy premier John Thwaites,

Mr Thwaites, the head of the federal government’s Circular Economy Ministerial Advisory Group, told The Australian that implementing a circular economy that promoted greater reuse of materials and resources could help to turn the country’s productivity woes around.

A slump in productivity has caused concern for the Reserve Bank, which worried that it will add fuel to the inflation fire.

Treasury forecasts released in June showed 20-year average labour productivity growth of 1.2 per cent compared to 1.7 per cent in 2015.

Speaking ahead of the Circularity Live conference in Melbourne next week, Mr Thwaites said reinvigorating the economy made sense to boost productivity and improve poor resource efficiency. “A circular economy can expand productivity by allowing businesses to produce more output with the current level of inputs,” he said.

“We’ve got a very high material footprint per head and by boosting our resource efficiency it will make the economy more efficient, more productive and will produce more jobs and more GDP.”

A circular economy gives markets incentives to reuse products, rather than scrapping them and then extracting new resources. In such an economy, all forms of waste are returned to the economy or used more efficiently.

Transforming the economy to a circular approach would also allow Australia to meet its decarbonisation targets, an opportunity Mr Thwaites saw given 70 per cent of all emissions come from the way products and food are made and used.

“It can also lead to innovation because circular business models often result in businesses coming together and being co-located, which can share resources, but also lead to more innovation and different ways of going about it,” he said.

Former deputy Victorian deputy premier and chair of the Circular Economy Ministerial Advisory Group John Thwaites.

UN international resource panel and former EU environment commissioner Janez Potocnik told The Australian that the country’s resource-centric economy offered lots of opportunities to optimise the use of resources.

“Australia is very resource-centric country, heavily surpassing planetary boundaries in many aspects,” he said. “We should stop stimulating extraction-based economic success and reward responsible, innovative, creative ways of meeting human needs.”

Mr Thwaites, who was appointed head of CEMAC by Environment Minister Tanya Plibersek in 2022, said Australia was behind the curve on a circular economy with Europe and other markets further down the route.

“It offers big opportunities for Australia and is estimated that we could boost our GDP by $210bn a year by 2048 through smarter use of materials in food transport and buildings,” he said.

The taskforce was established to guide Australia’s transition to a more circular economy by 2030 and Mr Thwaites added that there was evidence from the EU that the switch can create jobs.

The government in the past week also moved to revamp the Productivity Commission to make it more agile and attuned to opportunities for sustained growth in living standards as the nation’s growth in per capita GDP halved in the past 13 years to 1.1 per cent, which experts believe is due to a slide in investment, lack of innovation and a loss of dynamism.