Australia’s productivity growth has fallen to its lowest level in 60 years, averaging just 1.1 per cent a year.
The new figures are part of the Productivity Commission Report, which Treasurer Jim Chalmers says confirms “Australia has a productivity problem”.
In a speech to be delivered on Thursday, the Treasurer was quick to blame his predecessors for the low growth, saying that Australia had just exited a “wasted decade”.
“In the medium and longer term, our success will be determined by whether or not we can lift living standards – and that will be determined, in turn, by whether we can put the woeful productivity performance we saw during the wasted decade behind us,” he said.
Productivity is a measure of how the goods and services produced by Australia increase over time and can be affected by technological improvements, workforce skills, management practices and changes to capital.
Boosts in productivity growth are seen as the driver of long-term improvements in living standards, according to the Productivity Commission.
The trend has seen Australia slip ten places in productivity ratings, falling from sixth to 60th in the OECD from 1970 to 2020 according to Dr Chalmers, now sitting at 22 per cent lower than the United States.
If productivity remains at its current levels, the report projects that future incomes will be “40 per cent lower and the working week 5 per cent longer.”
Dr Chalmers will release the 1000-page report in full on Friday.
But he said in an address to CEDA the areas Australia need to tackle in order to boost productivity are “complex” and won’t respond to “whack-a-mole policy making”.
One of the largest issues is the growing services sector and the care economy, which has averaged zero productivity growth since 2000 and “will naturally expand and drag on productivity as our population ages”, according to Dr Chalmers.
The move toward net zero by 2050 was also flagged in the report, with the transition to require billions in investment.
“This will help us avoid some of the worst impacts of climate change by creating new sources of growth that will lift our productivity performance over time,” Dr Chalmers said.
The Treasurer also hinted at what was to come in the May budget, saying that “restraint” and “cost of living relief where we can afford it” will be the guiding principles behind decision-making.
“This won’t be easy or quick, but together, we can begin to methodically turn it around,” he said.