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Productivity growth slowest in 60 years

Australia’s productivity growth is the slowest it has been in 60 years according to an interim report from the Productivity Commission.

Productivity growth slowest in 60 years
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In the last two decades productivity growth has slowed and is set to decline even further with cost-of-living pressures and inflation.

Productivity Commission chair Michael Brennan said productivity growth is essential to address the nation’s economic challenges, including rising cost-of-living pressures, but it is not guaranteed.

“Productivity growth, based on the spread of new, useful ideas, is the key to Australia’s continued prosperity,” he said.

The commission released the first interim report as part of its latest five-year Productivity Inquiry.

The report stated that improving Australia’s productivity performance requires overcoming specific challenges – some global such as the need to decarbonise the economy as well as heightened geopolitical tensions and supply chain disruptions.

However, the biggest challenge in lifting productivity lies in the growing services sector where historically, productivity growth has been relatively hard to achieve.

“In 2022, 90 per cent of Australian workers are employed in the services sector. This has a significant impact on how we think about productivity. We have to look for new opportunities to drive productivity growth, including reviewing our policy levers and the industries where we concentrate our efforts,” Mr Brennan said.

“Nowadays, improvements in service quality and the impact innovative new products and services have on people’s lives matter most. However, the overarching principle of productivity – that we aim to work smarter, not harder or longer – is as important as ever.”

The commission has identified four areas of policy focus that best reflect the challenges and opportunities Australia faces and will shortly release interim reports on each of the productivity enablers for public consultation.

The key enablers of focus are innovation and diffusion of new processes and ideas; data, digital technology and cyber security; a productivity-friendly business environment; and a skilled and educated workforce.

“These enablers are relevant to our current context – the rising services sector, the challenge of decarbonisation and continued openness to the best the world can offer. But they also reflect our best judgment about where we can achieve the biggest return on our reform effort. They are not specific bets on the future sources of growth, so much as broad settings that stack the odds in Australia’s favour,” Mr Brennan said.

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