Unless we push for growth, average real wages will decline
The OECD average growth in labour productivity between 2010 and 2024 was a paltry 0.9 per cent, but in that period Australia managed to average only 0.5 per cent a year. The OECD average is poor, but compared with it we are a laggard. In Australia, labour productivity is about the same as it was eight years ago.
By contrast, during 1995-2005, labour productivity in Australia grew at 2.2 per cent annually. It underpinned real wage increases year on year. During the 11 years I was treasurer to June 2007 average real wages grew 21.5 per cent. If you look at the last 11 years in Australia, average real wages have fallen. Today, in 2025, real wage levels are at the level they were back in 2012. No wonder people feel they can’t get ahead – no real wage increase in a decade and more of what they get is taken away in tax.
Let me take another example of how our workplaces operate. I quote from a recent newspaper report (The Australian, September 25): “Since announcing in 2022 that addressing systemic non-compliance in the university sector was a priority, the Fair Work Ombudsman has entered into enforceable undertakings with La Trobe University, the University of Sydney, the University of Melbourne, the University of Technology Sydney, the University of Newcastle, Charles Sturt University and Griffith University; secured court penalties against the University of Melbourne; and it has opened legal action against the University of NSW. About $128m has been paid back to 50,000 employees. The National Tertiary Education Union says this has become a $278m national scandal affecting more than 100,000 university staff across Australia …”
Now all parties, employers, unions and employees, should abide by the law. That is a fundamental principle of the HR Nicholls Society. And the FWO is doing its job. But universities are run by highly intelligent people. They have enormous resources. They have HR departments and lawyers on tap. How is it that these universities all failed to comply with awards? Do you suppose these citadels of woke sat down individually or together to prepare a cunning plan to cheat their employees? Hardly likely. These non-profit organisations are funded with taxpayers’ money. Complying with an award doesn’t cost any person in university management anything at all. It doesn’t cost a shareholder or investor a cent. They have no incentive to cheat. This wasn’t malevolence.
Universities have been caught just like Coles and Woolworths, and the National Australia Bank, by confusing complexity. The “modern awards” that apply to these universities, and to these companies, are so vague and so complex that despite best efforts no one is really sure how to comply strictly with them. Employees are at risk of underpayment. Employers are at risk of prosecution. This is a system that is in neither’s interest.
There is nothing “modern” about these awards. A better name for them would be “arcane awards”. And these are the big employers. What do the companies that can’t afford expensive HR departments and fancy lawyers do? They are in a legal minefield.
This is where the complexity of Australia’s workplace laws lands us. Businesses and universities are scrambling to figure out what duties can be done by what classifications, what hours trigger what breaks, and what penalty rates start at what times. No wonder productivity is waning.
Let me repeat. No one is trying to cheat anyone here. They run the risk of non-compliance because sane, rational people cannot clearly work out what it is that they have to do to comply.
Does anyone in a position of influence think this is a problem?
We recently had a high-profile roundtable convened by the Treasurer to discuss Australia’s productivity failings. Was there a focus on these sorts of issues? Was our system of workplace relations even raised?
You can imagine that having created this framework, the government would not be keen to have it examined and measured for its productivity outcomes. But did any of the hand-picked participants raise it? What about our Productivity Commission? Does it think that arcane awards, same job, same pay legislation, legislated work from home, right to disconnect laws and the state of commercial building sites have an effect on productivity? It had nothing to say about this at the roundtable. I am told, for tactical reasons, the PC doesn’t raise things likely to get a hostile reaction from the government. These days the PC has gone PC (politically correct).
The Productivity Commission was established in 1998 as an independent statutory agency. Members have statutory protection and can be removed only for misbehaviour. The reason they have this protection is so they can tell the government and the public “home truths” when they are needed. If the PC is not going to use its statutory independence to tell inconvenient truths, then it is not going to be much use. The Treasury Department has become adept at telling the government what it wants to hear. The PC will not add very much if it goes down the same path.
The Productivity Roundtable came up with no outcomes that will significantly boost our productivity. It managed to avoid talking about things that really might make a difference like lower energy costs for business, real tax reform (as opposed to smash-and-grab raids for revenue), ending wasteful government spending and reforming workplace relations.
How can we hope to break the productivity drought when there is no honest analysis of the factors contributing to it? We should discuss the real things holding back productivity, and then, more importantly, we should urgently reform them. Better outcomes will only come from better policy. Our drift into decline will continue if we choose to ignore its causes.
Peter Costello is a former federal treasurer.
Lost in space on satellite spending
In Victoria, taxpayer-funded projects run tediously late and massively over budget. Organised crime has infiltrated building sites and is extracting protection money. All this is built into the cost that is ultimately paid by the taxpayer. In Sydney, an ABC Radio host contracted to fill in on five shifts was taken off air after three. She sued for political discrimination and was awarded $70,000 in damages. The ABC tells us it has spent $2.5m on the case. That’s an expensive couple of shifts. Of course, taxpayers pay for that too.