The Productivity Problem. Australia’s Growth Slump Is Undermining Prosperity | Jim Cox

For all references and graphs, read the paper here: https://www.cis.org.au/publication/the-productivity-problem-australias-growth-slump-is-undermining-prosperity/ 

Key Findings:

• Labour productivity growth has halved, sliding from 2.4% a year in the late 1990s to just 1.2% in recent years.

• Australia is falling further behind the United States, with the productivity gap now wider than it was in the early 2000s.

• Business investment – a driver of growth – is subdued, starving firms of the latest technology and techniques needed to compete globally.

Cox outlines that even small, sustained improvements in productivity compound into large gains. Conversely, persistently slow growth risks turning policy development by political parties into a zero-sum scramble for slices of a shrinking pie, undermining social cohesion and democratic norms. The paper identifies a triple threat:

1. Dwindling innovation diffusion, in which Australian firms are adopting new ideas more slowly than global leaders.

2. Rising regulatory burden, with Commonwealth legislation now containing 356,198 restrictive provisions, up 80% since 2005.

3. Cultural change, with surveys revealing fewer Australians now see work as “very important”, while support for environmental protection over economic growth has risen.

Cox calls for a new wave of micro-economic reform, smarter regulation that does not stifle experimentation, and a renewed national conversation about the values that underpin innovation. “Prosperity is not automatic,” Cox concludes. “It requires deliberate choices: investment in skills, encouragement of risk-taking, and institutions that reward creativity rather than rent-seeking.” “The prize is a richer, fairer and more resilient Australia.” A subsequent paper by Cox, which proposes options — including a new initiative — to best boost productivity growth rates to promote greater prosperity, will be published by CIS on Thursday, August 14. Jim Cox is a prominent economist and former Deputy Chair and board member of the Australian Energy Regulator, and former chief executive of the Independent Pricing and Regulatory Tribunal. He has held positions with the Reserve Bank of Australia, the Department of Prime Minister and Cabinet and the Social Policy Secretariat of the Department of Social Security.