The rise in Australian productivity during the past decade has been the slowest it has been in the last 60 years, and the Australian government is afraid that this trend will continue if the nation does not respond to the massive structural changes that are occurring in the economy, especially the transition to net zero.
Productivity growth is still a concern, according to the most recent intergenerational study, which will be presented by the treasurer on Thursday. The research also reveals that Australia is not immune to slow economic development any more than other significant economies around the world.
Throughout the decade leading up to the year 2020, the average growth in labour productivity was only 1.1%, compared to 1.8% throughout the preceding 60 years leading up to 2019-20. The same issue was discovered by an inquiry conducted by the productivity commission that was published in February. The report’s conclusion was that Australia need “policy settings that foster a flexible as well as dynamic economy.”
The research urges “reforms that reduce entry and exit barriers for firms” with the belief that increased competition will result in “greater dynamism” within the economy if certain recommendations are implemented. One aspect of this is facilitating worker mobility “by better matching workers with a wider spectrum of emerging employment opportunities.”
The research urges Australia to seize the opportunities presented by the transition to net zero energy use while simultaneously remaining at the forefront of technological advancements incluidng cloud computing, machine learning, as well as artificial intelligence.
“The transformation to net zero is resulting in the creation of new markets, the disruption of established trading patterns, and the introduction of opportunities to reduce the cost of power. An excerpt from the IGR states that “rising temperatures present a range of challenges to productivity growth, which increases the importance of planning and investing in adaptability and resilience.”
As a reaction, the Albanese government has outlined five “key pillars” of economic growth. These “key pillars” correlate with the IGR’s call for “new frontiers for innovation and investment” and the need to assist workers in continuously upgrading their skills throughout the course of their careers.
As part of their efforts to promote “economic dynamism and resilience,” the administration is “refreshing and renewing our economic institutions,” according to Chalmers. They are also striving to increase the supply of housing and develop infrastructural pipes that are more environmentally friendly.
The development of a “skilled and adaptable workforce,” together with data and digital technologies, as well as the expansion of the nation’s care economy and public services, continue to be primary emphases. The shift to renewable energy sources in Australia is the fifth priority, with “becoming a renewable energy super power” as the ultimate objective.
According to Chalmers, “the intergenerational report will make the critical point that the trajectory of productivity growth in the future is not a foregone conclusion, and it will depend on how we respond to the big shifts impacting our economy.” “The intergenerational report will make the critical point that the trajectory of productivity growth in the future is not a foregone conclusion,”
“Instead of forcing people to put in more effort for less pay, we take the approach of investing in our workforce, in their abilities and knowledge, in the innovations and technologies that will make energy cheaper and cleaner.
“We can build a more productive and prosperous economy by making the most of the opportunities presented by the energy transformation, by welcoming new technology, and by investing in our people and the skills they possess,”
Chalmers stated that increasing productivity was “vital to boosting wages and living standards” and that this was the reason why it was taking the message of the most recent IGR seriously.
The IGR is published around once every five years and is the Treasury’s attempt to estimate what the next four decades will be like. While the study does not directly influence government policy, it does provide valuable insight.