AI in sights to build up nation's sliding productivity

Perth Now

26-05-2025

Beneath its robust facade, deep-seated cracks threaten the integrity of Australia's jobs market.
Wages are growing in real terms, unemployment is historically low and falling interest rates bode well for further jobs growth.
But employment growth has been lumpy, with investment in government-reliant industries such as health and childcare masking weakness in the market sector, says Deloitte Access Economics partner David Rumbens.
As growth in public spending and immigration trend downwards, the pace of job creation will slow from 2.7 per cent to 2.3 per cent in 2024/25 and 1.5 per cent the year after, Deloitte's latest quarterly Employment Forecasts report found.
The good news is wages growth remains strong and Australia's economy looks to be on the way up, despite uncertainty caused by Donald Trump's trade war.
"All sectors are expected to benefit from the gradual economic upturn, with consumer-facing industries poised for growth due to the combined effects of tax cuts, government rebates and anticipated cuts to interest rates," said Mr Rumbens, the report's lead author.
But Australia's abysmal productivity performance threatens to limit workers' dividends.
"The sustainable way to maintain healthy wage growth is through productivity gains - something the treasurer has recently nominated as being central to the Labor government's second term," Mr Rumbens said.
Since March 2022, labour productivity - the output produced by a worker over a given amount of time - has fallen by 5.7 per cent.
Treasurer Jim Chalmers has said while the first term was focused primarily on getting inflation down and improving productivity second, reigniting productivity growth would be the main economic focus of the next three years.
To that end, the Productivity Commission will conduct inquiries into 15 reform areas, including finding a way to harness generative artificial intelligence.
As well as making workers more efficient, Deloitte Human Capital Partner Sarah Rogers said AI could free up employees to perform higher quality or new work, enhancing a job's desirability.
"For example, the role of AI for professionals is enormous," she said.
"There are large opportunities for automating or augmenting routine tasks and creating worker efficiencies across many occupations."
Productivity outcomes have been particularly dismal in the construction industry, compounding the challenge of increasing dwelling supply to make housing more affordable.
A report by the Committee for Economic Development of Australia found the dominance of very small businesses, inefficient tax settings and overly-complex land regulation was dragging the industry's productivity down.
As a result, Australia is building half as many homes per construction worker today as in the 1970s, said the committee's chief economist Cassandra Winzar.
To fix it, Australia should encourage building companies to move away from the dominant sub-contracting model and grow in size.
"Smaller firms are less productive than bigger firms because they can't achieve the same productivity gains from innovation, investment and economies of scale," Ms Winzar said.
Stream-lining planning and zoning laws across all levels of government and expanding national licensing for trades such as electricians would remove barriers for firms to expand interstate, the report found.
The government should also reform the tax system to remove disincentives for sole traders from joining a business, with self-employed workers paying less tax than salaried employees.