Productivity matters, in the long term. The more valuable the goods and services we, as Australians, can produce by our labour, the higher our material standard of living – or, alternatively, we can choose to work less and take our productivity gains as extended leisure time. While it certainly doesn’t capture everything about the way we are able to live and work – the quality of the work environment, the damage to the natural environment, and so on – it is important. While Australia is already a rich country, there are many things we currently don’t have – an environmentally sustainable energy system, a fairer, better education system, and so on, that will be much easier to pay for if we are able to focus our collective efforts more efficiently. And that’s what productivity measures, if imperfectly.
And so, an alleged slowdown in productivity growth in the last few years has been the subject of much fevered debate, with the Fin Review and The Australian regularly claiming it’s all down to those dastardly unions and their dastardly conspiracy to have the Howard government voted out and Labor reinstating the supposed bad old days of union bloody-mindedness.
The argument that industrial relations laws had any great impact on productivity has seen a number of rebuttals, notably by Matt Cowgill‘s handy charts.
The most recent data suggests that productivity growth roared along in 2012. Reserve Bank Deputy Governor Philip Lowe gave a speech recently presenting the latest productivity statistics from the ABS…and, shock horror, they’re better than they have been for some time. Lowe is optimistic the trend may continue:
While these data tend to be volatile from year to year and subject to sizeable revisions, productivity growth in 2012 was better than it has been for quite some time. Of course, we cannot be sure that this will continue, but the structural changes that are now occurring mean that there are reasonable prospects for a sustained lift in productivity growth.
There are alternative explanations floating around. A report by a team led by Professor Roy Green for the McKell Institute argues that factors such as the drought (and the associated construction of desalination plants and the like), and especially the effects of the massive investment in mines, gave a misleading impression of the productivity picture. With these factors leveling off as the new mines start to come into production and desalination plants cease being built (even if they sit idle), productivity would be expected to improve again.
As the McKell Institute report points out, there are a number of things Australia can do to improve its productivity performance over time. Improving our education system (Gonski, anyone) would always help. Improving the subpar standards of Australian management might also help. And there is still plenty of scope for improving productivity throughout the growth industries of the 21st century, the health and education sectors.
But the notion that there is an immediate crisis in productivity requiring drastic action – particularly the reimposition of something like WorkChoices – is looking rather shaky, to say the least.