Business identifies need to boost productivity agenda

Despite strong jobs growth and inflation pressures easing, the economy remains fragile, with a need to boost productivity to safeguard living standards, business leaders warn in The Australian’s CEO Survey 2025.

In compiling the annual survey, our business journalists spoke to more than 70 of the nation’s corporate leaders, from mining, energy, banking, manufacturing and retail. We canvassed their views about the nation’s economic performance and the prospects for much-needed reform, their plans for investment, and the likely impact of the election of Donald Trump on tariffs, which could slow sections of the economy.

Persistently high inflation – especially if the political parties offer costly promises ahead of the coming election – was identified as a potential problem. Like many economists, some CEOs believe there is no certainty of an interest-rate cut when the RBA board meets again in February.

The release of our survey coincides with Thursday’s ABS data showing a surprise decline in the unemployment rate to 3.9 per cent last month, from 4.1 per cent in October. The buoyant jobs market, which was stronger than economists had expected, only served to reinforce doubts about the prospect of a February cut. While good news for jobseekers, the trend also underlines one of the nation’s economic weaknesses.

Separate ABS figures, released last week, showed growth in government-aligned roles was running at four times the rate in the private sector. Of about 160,000 additional people employed in the September quarter, Jack Quail reported, 146,000, or 91 per cent, found work in the non-market sector covering education, healthcare, the care economy and the public service.

The ever-growing government footprint, funded by taxpayers, will not create the productivity and revenue the economy needs. And, as the RBA has warned, excessive election spending will slow the inflation fight.

Government spending underpinning the economy and stagnant productivity were threats to the nation’s economic future, as Shell Australia’s Cecile Wake told the CEO Survey. Significant and sustained private investment was required to deliver stronger growth, she said.

But an uncompetitive tax regime, complex regulation and market interventions had clogged the arteries of investment. And ever-increasing tax and duty rates being applied by most state governments were holding back investment, David Harrison, CEO of Charter Hall property investment and funds management groups, warned.

State government revenue fell in absolute terms as tax rates rose, he said, because the increases virtually stopped dead capital investment. This was most evident in states that were overtaxing property and distorting capital markets by deterring foreign investment.

For several years, as Victoria scrambles to repair its debt-ridden balance sheet, The Australian has warned against the downsides of onerous property taxes contained in recent budgets. It was no surprise that a recent report by the Business Council of Australia ranked Victoria last across all states and territories in the country as a place to do business.

Consistent with The Australian’s interpretation of recent economic data, including abysmal growth of 0.8 per cent since September 2023, revealed in the National Accounts, Ms Wake said falling productivity was a threat to the economy and the living standards enjoyed by Australians for decades.

In a high-cost environment, the Goodman Group was focused on productivity and getting more out of less, CEO Greg Goodman said. What was needed, he said, was more emphasis on productivity and more encouragement and incentives for businesses to grow.

That agenda would be more beneficial in the coming election campaign than populist subsidies and handouts.