Jim Chalmers tasks former boss Chris Barrett with overhauling Productivity Commission

Labor will reshape the Productivity Commission through the appointment of Chris Barrett as its new chair.

Treasurer Jim Chalmers and Chris Barrett, appointed by Dr Chalmers to head the Productivity Commission.

Jim Chalmers has tasked his former boss in Wayne Swan’s office, Chris Barrett, with reshaping the Productivity Commission, and flagged a major renovation of the economic advisory body including its approach to human capital and clean-energy transition.

The Treasurer announced on Monday that Mr Barrett, Australia’s ambassador to the Organisation for Economic Co-operation and Development from 2011-14, would start his five-year term in September, replacing outgoing Commission chair Michael Brennan.

Mr Barrett, who holds a masters in public policy from Princeton, was chief of staff to Mr Swan from 2007-10 when Dr Chalmers served as deputy. He also served as a senior adviser to Labor leader Kim Beazley between 1996 and 2001.

After his OECD role, Mr Barrett served as an executive director at the European Climate Foundation in Berlin from 2015-19.

Dr Chalmers said Mr Barrett would help to implement a “reform agenda” for the Productivity Commission, arguing the government intended to “renew and refocus and revitalise” the advisory body to “get productivity growth going again”.

“The Treasury has been leading quite a detailed and comprehensive consultation process,” he said. “I’m looking forward to working with Chris on our PC reform agenda.”

Dr Chalmers indicated the PC should take a “more modern approach to data, clearly an approach which recognises the vast industrial and productivity opportunities of the energy transformation (and) clearly the way we think about human capital”.

He also provided an assurance the Commission would remain independent, and said the details of the overhaul would be made clear in “months, rather than years”.

Dr Chalmers said Mr Barrett’s appointment was merit-based and involved interviews with two departmental secretaries, including Treasury secretary Steven Kennedy, and the Australian Public Service Commissioner before cabinet signed off on the decision.

Insiders told The Australian Mr Barrett – who advises the Victorian Labor government as deputy secretary of the economic division of the Department of Treasury and Finance – was “highly regarded” by the federal Treasury and had strong economic credentials while being “Labor through and through”.

As chief of staff to Mr Swan from 2007-10, Mr Barrett helped the government respond to the global financial crisis through a $10bn “cash splash” and subsequent $42bn fiscal stimulus package. He was also forced to deal with the backlash to Labor’s failed experimentation with the Resources Super Profits Tax, which contributed to Kevin Rudd’s demise as prime minister.

The shake-up of the Productivity Commission comes after a push from the ACTU for the body to be “repurposed or replaced”, with the peak union body warning the government in December it promoted an “outdated and ineffective economic ideology of privatisation and deregulation”.

ACTU secretary Sally McManus said on Monday the Commission, along with the Reserve Bank, had suffered from “groupthink” and the advisory body needed a greater “diversity of views”.

Business and industry leaders welcomed Mr Barrett’s appointment but demanded action from Labor. Australian Industry Group chief executive Innes Willox said lifting productivity was “taking on a renewed urgency as we face a rapidly changing and more challenging economic environment”.

“We have suffered from flatlining productivity and low real incomes growth for many years, and lifting us out of this malaise is essential to building a successful and dynamic economy to underwrite improvements to Australian living standards,” he said.

Australian Chamber of Commerce and Industry chief executive Andrew McKellar said it was a “critical time for the Australian economy with productivity contracting” and “new thinking” was needed to lift productivity growth and maintain living standards.

The comments echo concerns from outgoing Reserve Bank governor Philip Lowe, who used his final foray on the world stage at the G20 in India earlier this month to warn that a failure to lift productivity would result in “lower sustainable growth in real wages” as well as “smaller public services”.

Opposition Treasury spokesman Angus Taylor said the Coalition was not consulted about the Barrett appointment and warned it would be scrutinised at Senate estimates.

Mr Brennan said it was an “outstanding appointment” and Peter Harris, PC chair from 2012-18, said it was a “good appointment”.