Productivity growth vital to lift wages, living standards

From business leaders to Treasury secretary Steven Kennedy and the RBA board, key economic players are increasingly raising the issues of improved productivity being vital to lifting living standards, economic growth, higher revenue receipts and helping control inflation. Given the importance of labour productivity, the Albanese government and the Fair Work Commission cannot afford to ignore the issue as the government prepares to deliver its second round of workplace relations changes. As workplace editor Ewin Hannan reports on Friday, employers have warned that the government’s proposed “same job, same pay” labour-hire laws risk exacerbating workforce shortages, driving up food prices and creating a “massive compliance bomb for business”. Extra red tape is the last thing businesses need.

Businesses are increasingly opposing the new laws, which are designed to crack down on worker exploitation by labour-hire firms. In a discussion paper to the government responding to the proposed changes, the Australian Chamber of Commerce and Industry said the policy had the propensity to impede the use of labour hire, exacerbating workforce shortages. That, in turn, could hold back production, profits and government revenue. Flexibility was needed, the ACCI argued. “Contrary to the assumptions of the critics of labour hire, reduced usage in labour hire will not result in an increase in direct employment by host companies,’’ it said. “The very purposes for which labour hire is engaged require the use of arrangements which are an alternative to, not in substitution for, direct employment.’’

The close links between productivity, growth and inflation were highlighted on Thursday by Dr Kennedy. In a frank post-budget speech, he warned the abysmal productivity performance would wipe out more than half the expected economic bounty from full employment, record migration and the commodity price boom.

As Tom Dusevic reports, Dr Kennedy set out the nation’s economic to-do list, including rebuilding fiscal buffers before the next crisis, improving the quality of taxing and spending, encouraging business investment, better competition policy to support dynamism, and stricter limits on social programs, particularly the National Disability Insurance Scheme. Reversing the decline in productivity growth was a long-term structural challenge that had implications for the fiscal position and living standards. Dr Kennedy singled out the importance of “a well-functioning skills system’’ and infrastructure that would allow individuals, businesses and communities to plan, invest and adapt to change.

In the minutes of its May board meeting, the RBA also warned that the nation must kickstart productivity or homebuyers would be hit with more interest rate increases. In Thursday’s business pages, industry leaders called for greater effort on productivity through investment and less red tape. Apartment developer Harry Triguboff called for faster approvals to ease the housing shortage. “When we talk about future productivity, we must remember that apartments have to be approved, which will take an average of one year,’’ he said. “Building apartments will take two years so there will be very little available for the next three years.’’ HSBC Australia chief executive Antony Shaw said improving productivity and competitiveness was the only way to lift living standards, make the economic pie bigger, and grow real wages.

In NSW, the demand by unions that Premier Chris Minns revive a stronger Industrial Relations Commission and ensure future public sector wage increases include pay that was lost under previous Coalition governments will not help.

The focus on productivity coincides with unemployment climbing to 3.7 per cent in April from 3.5 per cent, in a sign that monetary policy tightening has begun to weigh on the post-Covid jobs boom.

While unions attacked the RBA’s “relentless” rate hikes, employers said the job losses were a warning that another major increase to the minimum wage could cause further job losses. The jobless rate remains at 50-year lows, with nine in 10 businesses still struggling to find workers.