Why every Australian is losing $3600 a year as a result of Australia's failure to tackle productivity

News.com.au

21 hours ago

Treasurer Jim Chalmers has put a price tag on Australia's failure to make big productivity gains in the last decade warning it is costing every Australian thousands of dollars in lost wages.
Ahead of the Albanese Government's economic roundtable set to kick off in Canberra next week, the government is laying out the problem it insists is a major focus of its second term: productivity.
And the cost of that failure to boost productivity is having a real impact on Australians' ability to secure a pay rise and businesses' ability to turn a profit.
It's a factor in why it's harder to buy a family home, pay for the groceries at the shops and why it takes too long to build infrastructure and build new homes.
In simple terms, productivity means producing more goods and services from the same inputs – using new skills or technologies such as artificial intelligence or by coming up with more effective ways to work.
But Australia's productivity gains have stalled, leading some workers and businesses to feel they are going backwards.
New data prepared by the Albanese Government claims the productivity slowdown under the Coalition government is costing Australians as much as $3600 a year in lost income.
'The wasted decade under the Coalition is costing Australians dearly,'' Treasurer Jim Chalmers told news.com.au.
'This big drop in productivity growth has hit Australians in the hip pocket.
'Our predecessors ignored the warning signs and people are paying the price for it.
'We don't intend to waste the next decade like our predecessors wasted the last.
'We don't pretend it will be easy and it certainly won't be quick, but we've got a big and broad agenda aimed at tackling this productivity challenge and we're keen to add to it where we responsibly can.'
The arithmetic on the $3600 cost is based on the idea that productivity was growing at 2 per cent per annum when the Coalition came to office but just 0.1 per cent per annum in the year before Covid-19 hit.
According to the Albanese Government, if productivity had grown at 1.5 per cent - as forecast in the Budget - instead of 0.9 per cent in the six years prior to Covid, the level of real and nominal GDP would have been 3.6 per cent higher at the start of the pandemic.
Even allowing for the volatility since then, the Treasurer argues that the 3.6 per cent shift in the level of nominal GDP is equivalent to around $3600 in lost income per capita in 2023-24.
Dr Chalmers said the figures underlined why the Albanese Government was determined to talk about solutions.
'This is about setting the next generation of Australians up for success long after the next election cycle,'' he said.
'It's about higher wages, higher living standards and a better future for our children and grandchildren.'
Business leaders have suggested one way forward is reduced regulation and lower tax.
Unions have suggested a four day working week, negative gearing reforms and changes to capital gains tax.
Lower pay rises, weaker consumer spending, softer business profits and declining living standards is the problem the government wants to tackle.
The Treasurer has previously suggested that the productivity debate has 'focused too narrowly on one or two issues', and that the task now is 'broadening that focus out'.
'The challenge, however, is immense. Our productivity growth over the past decade was the worst in 60 years,'' Business Council of Australia chief executive Bran Black said.
'And yet, with all shoulders to the wheel, and agreement on what can and must be done, we believe Australia is capable of much more over the next decade.
'Here's how: First and foremost, we need to deliver our major projects and endeavours faster. It's not acceptable that building a renewable energy project in Australia can take more than two years of approvals before shovels are in the ground.
'Countries that get there faster will deliver better and more outcomes for their citizens, and that's why we're determined to work constructively with the government on implementing federal project approvals and reforms that get it right for both the environment and for business.'