Productivity push starts at home for big government

If the Albanese government is serious about building productivity and freeing the economy to grow, it must first get its own house in order. As chief political correspondent Geoff Chambers has detailed over a series of reports, the nation’s growth sectors throughout the Albanese term have been trade unions and the public sector workforce, with an emphasis on high rates of pay and roles that too often act as gatekeepers to productivity and as a handbrake on innovation.

Anthony Albanese says he has recognised the problem. In his address to the annual Australia’s Economic Outlook event in Sydney on Friday, the Prime Minister will declare it is time for big employers and small business owners to be the primary drivers of the economy. In a speech outlining his second-term economic vision, Mr Albanese will focus on the need to modernise the economy, embrace new technologies, cut red tape, progress tax reform, and turbocharge productivity. “Our government wants you (private enterprise) to be able to resume your rightful place as the primary source of growth in our economy,” Mr Albanese will say. “Some of this involves government doing less. Clearing away unnecessary or outdated regulation. Eliminating frustrating overlap between local, state and federal laws.”

Next month’s economic roundtable with business leaders and unions is an opportunity to demonstrate his government is up to the task. The relationship between the government and corporate Australia has been strained by a raft of regressive industrial relations laws and stagnation in taxation and productivity reforms. It is encouraging that Mr Albanese and his Treasurer Jim Chalmers are now embracing the need for a productivity agenda, and appear to accept that success will involve lifting the dead hand of regulation.

The Albanese bureaucracy has been stacked with almost 115,000 compliance, regulation, administration, project management, marketing, human resources, and policy and service delivery staff. The number of federal bureaucrats is set to expand to a record 213,000 in 2025 after hitting a 14-year low of 144,709 employees at the end of 2019 under the Morrison government. These numbers do not include workers who have been given wage subsidies by the government, nor those employed in a “care economy” workforce funded by taxpayers, such as the National Disability Insurance Scheme, where demand for service has been prioritised over a capacity to deliver or pay.

There is little data to demonstrate that the extra public servants have delivered a commensurate increase in service quality or efficiency. The expanded public service is overseen by a collection of 17 public service mandarins with combined remuneration packages valued at up to $16.3m, excluding travel expenses and other perks. All have recently been given salary increases of up to $24,280 a year.

Rather than build empires, public service leaders must find ways to improve services and productivity. This involves harnessing the powers of the digital economy and artificial intelligence to deliver many of the functions of government in a way that is better suited to the modern world. For productivity, it is particularly worrying the way in which trade unions are currently being dealt into the heart of public service decision-making. Unions and public servants have a role to play but without corrective measures, the legacy of the Albanese government risks being one that is all too familiar for left-leaning governments everywhere. That legacy is one of high debt, an unsustainable budget, and a productive economy and industry hamstrung by layers of bureaucratic interference that is designed more to protect the public sector establishment than deliver to those it is supposed to serve – the public.