According to the latest Productivity Update, released by the Productivity Commission in 2013-14, labour productivity growth in both the Australian economy and the 12-industry market sector (which accounts for 65 per cent of the economy) was close to the trend of the last 25 years. But growth of multifactor productivity remains below the longer-term average.
Investment in new capital has consistently played a key role in lifting Australia’s labour productivity and supporting the introduction of new technologies and ways of working.
Australia’s productivity performance has a major influence on real per capita income growth. Gross national income is an indication of our living standards and prosperity. Productivity growth improves current living standards as well as the nation’s capacity to address future challenges such as our ageing population and global economic shocks.
In the last five decades, per capita national income growth has averaged around 2.1 per cent per year. Its growth has been increasing since the 1970s to reach 2.3 per cent per year in the 2000s, but it has retracted in the latest 2010-14 period to 1.7 per cent per year. As the terms of trade effects associated with the mining boom taper off, it will be crucial to achieve higher productivity in order to maintain and increase per capita incomes.
Without a serious effort to resume and sustain productivity growth in Australia, the trend decline in the terms of trade from current high levels and falling participation rates, indicate that Australia’s national income growth per person will be subdued and improvements in living standards could be eroded.
While it is comforting to see the array of summits, hackathons, government inquiries and reviews, where these matters are being talked about and considered, it is just as critical that we start to see this translate into coordinated and sustainable action.
Australia’s economic performance should be a major concern for every Australian. Our current relatively high living standards cannot be taken for granted. The time for complacency is long gone.
Vicki Stylianou is the executive general manager of advocacy and technical for the IPA.
