August 17, 2025 • 13 mins
How do we fix the productivity crisis?
Today Michael Thompson is joined by economist Stephen Koukoulas to talk about the government's productivity and economic reform roundtable, which begins tomorrow. Last week RBA governor Michele Bullock called out productivity as a key challenge for the economy. So why is productivity so important, what does it look like, how do we measure it, and how do we fix the productivity crisis?
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:06):
Welcome to Fear and Greed Q and A, where we
ask and answer questions about business, investing, economics, politics and more.
I'm Michael Thompson, and today how do we solve the
productivity crisis? Every Monday morning, we're joined by economist Stephen Coacoulis.
You'll find him at the kook dot com and on
x using the handle the Kook. Stephen, Good morning.
Speaker 2 (00:25):
Very good morning, Michael.
Speaker 1 (00:27):
So let's start with productivity because there's a lot of
things I want to talk to you about, but productivity
it is, well, it's the buzzword of the week, right.
We've got the Productivity round Table, or the Economic Reform
Roundtable starting in Canberra tomorrow. And productivity really came up
in a big way last week when we had Reserve
Bank Governor Michelle Bulloch calling it out as being the
big challenge revising down forecast. But it's not the RBA's
(00:50):
job to fix it. That's that's government. So let's start.
Let's unpack all of this. Why does productivity matter so much?
Speaker 2 (01:01):
In a nutshell, productivity is the way that we improve
our living standards. So if we as a society, as
an economy can produce more output that means that we're
getting more national income and that is difided between corporations
and the workers. That's sort of one of the distributional
(01:22):
issues about productivity. But over time, and look at the
productive is not one of these things that you get
a sugar hit in one year. It's one of these
long run structural things that if you've got an efficient
economy that's innovative, that's got a competitive tax system, it's
got a competitive labor market with skills and knowledge and
education needed to undertake this new technology, something that's really
(01:45):
pertinent right now, you will get more economic output for
the level of capital investment and your labor, your workers.
And that's how productivity improves the living standards of all people.
And it's been you know, it's been lacking the last
decade decade and a half or so, it's been very
(02:05):
very weak, whereas back in the day, if we can say,
pre two thousand or something, we were having really solid, strong,
sustained lifts in productivity.
Speaker 1 (02:14):
Okay, in that case, how is it measured? Is it
a case of you referred to economic output and is
it a kind of a combination of these various factors,
and in doing so, you're able to determine what is
the productivity rate?
Speaker 2 (02:29):
Michael, that is a really challenging question. I'll tell you
how it's measured. Now. Whether this is the way that
the Bureau of Statistics capture is another issue. But it's
basically GDP the economic output of an economy. So that's
both widgets and tons of wheat and tons of iron
ore and buildings that are erected in those sort of things,
(02:50):
plus the wage that people in services get. So the
IBA governor, the productivity commissioner, so what's their output. It's
assumed to be their wage, So that's how it's measured.
It's the number of hours worked in the whole economy.
So that's what thirteen to forteen million people times thirty
three hours a week or whatever it is, times the
(03:11):
economic output that gets your productivity. Now, if I can,
if you can indulge me just one moment here, please,
because this is one of the things that is I
think creating a problem for this productivity summit this week
is that some industries, and as we move towards the
services based economy, some industries it's very very difficult to
(03:34):
measure productivity, and they are predominantly services. This is not
to say that services aren't productive on the contrary, but
it's measuring it. How do you mention the productivity of
a firefighter? How do you mention the productivity of a
test cricketer? How do you mention the productivity of a
journalist an economist? It's very very hard. Is it more reports?
(03:54):
Is it more fires? For a firefighter? Is how do
you mention the productivity of a priest you know? Or
a librarian. There's a whole lot of industries where it's
difficult to get a full measure and I think that
as we've moved to a service as economy that might
be distorting these measures as well. Not saying productive is
not unimportant. It is important, but there are issues of measurement.
Speaker 1 (04:16):
So is it?
Speaker 2 (04:16):
Then?
Speaker 1 (04:17):
In some of those examples that you gave, are there
occupations in industries where it is not just hard to
measure but also hard to improve it because there is
only so productive. You can only be so productive at
a particular job.
Speaker 2 (04:31):
One other example is sort of like age care and
nurses and cares. If you like that, how do you
judge the output all the productivity of a nurse in
intensive care he or she's got to look after these
people who are obviously in a bad way. And if
all they're doing is looking after them, which is a
job to sort of say, well, I'm going to spend
(04:52):
a bit less time looking after this poor person has
just had heart bypass surgery. I'll spend a bit more
time somewhere else. Will know that'd be more productive. Definitely
it would be, But it's not the sort of way
that you improve productivity. So for some industries, as you mentioned,
and that's just one example, not only is it difficult
to measure, it's difficult to achieve. And sure you can
have better computer systems where you write down the notes
(05:14):
of the patient with their blood pressure and pulse machines
and all this other stuff, but that's that's more for
the patient care. I don't think that improves necessarily the
output of the nurse or the care.
Speaker 1 (05:26):
There's not exactly a wholesale change. That's not going to
be an enormous improvement overall.
Speaker 2 (05:32):
And if I can answer this, say too, March, because
this is another example which I like to use and
it does really hit home how productivity does work. Think
of an iron ore field in the pilbra in Wa
you've got ten workers with a pick and a shovel
and a wheelbarrow. They're not going to dig out a
lot of iron ore, are they? For the ten workers.
If that company invests in machinery and equipment and a
(05:55):
rail line that takes the big diggers and trucks and
things ten workers, you would get an incredible lift in
the tonnages per worker. So capital investments in another important
part of that productivity equation. That one is easy to understand.
You know, nurses and teachers. If you have a class
size of fifty children rather than twenty, sure that's more productive.
(06:19):
But you know, as a parent who will used to
have kids going to school, I want a good parent
teacher ratio so my children and all the other children
in education get a really good quality of care and learning.
Speaker 1 (06:31):
So you mentioned, though that the productivity challenge that we
face at the moment is not a new one. It
hasn't just come up this year or in the last
couple of years. It's been around now for decade, fifteen years.
But it does appear certainly not going anywhere. How much
pressure then is on this productivity roundtable, the economic reform roundtable,
(06:53):
but it is about productivity really how much pressure on
it is there to actually have something meaningful come out
of it that's going to give us a boost. And
what happens if we don't get something? Is it this
handbreak on economic growth?
Speaker 2 (07:07):
It is something that has to be done that there's
got to be a change. And we've seen all the
submissions or many of the submissions from the union movement,
from the Business Council, from the think tanks that are
going to be there, and a lot of other academics
and politicians of course, and they're the ones that are
going to implement the reforms needed. So I'll just take
a step back again. Everything that's going to be on
(07:28):
the table at the Productivity Summit, the Economic Summit will
require the government to implement those changes. They don't happen magically.
This is where we have the politics versus policy dilemma
coming in. You know, we know what things improve productivity.
We can have a chat over the next hour about
(07:51):
what improves productivity and we know what they are. However,
we the electorate often shy away from it, which means
the politicians shy away from it because if they meant
this change, they'll lose the election. So it's important that
Jim Chalmers is the Treasurer and the other ministers of
the working on this productivity and the recommendations that come
(08:11):
from it, actually spend time talking to the Electric through
the media, through their high profile, selling the story if
you like to get this productivity reformed through So yes,
they have to do something. And it ranges from skills
education and training, red tape production, making tax system more efficient.
(08:32):
So there's a myriad things that we sort of know already.
It's just having the ability, the wherewithal and the sales personship,
if we can call it that, to sell it to
the Electric so that we vote for them to implement
it next election.
Speaker 1 (08:46):
Okay, I'm going to put you on the spot here
and just imagine that you were, in fact the Prime
Minister and you weren't worried at all about re election,
that you were going to be retiring. So it doesn't
matter what the Electric thinks of you. If there was
one thing that would give the greatest improvement to productivity
moving forward, because if you say this is not a
(09:07):
quick fix, it's a long term thing. What would be
the one thing that you would change.
Speaker 2 (09:14):
The one thing that I think yields. The most thing
is i'll call it red tape, duplication of services between
the federal, state and local government sector. So for example,
we have a federal Department of Health and six and
two territory departments of health and departments of education and
(09:34):
road rules. So if I drive across the border from
New South Wales to Victoria, there's different road rules. If
I just move from Aubrey to Wodonga, I've got to
go through and change my driver's license and car regio.
All of that sort of stuff is and that's just
a micro example, just by the way. I don't think
that's going to fix the whole productivity issue, but we
have state and territory and local governments. This building is
(09:56):
construction is a really hot topic too, which will be
at the summit this week. Is just really getting rid
of impediments to businesses doing stuff and so tax reform, yeah,
that will help a little bit. Skills education and training
is another one that I wouldn't discount either. So I'm
probably giving you quite a few answers, right, but it's
(10:18):
really this. It sounds a bit cliche, but the red tape,
the regulation, the duplication of services, you're getting a block
of land, getting a dwelling approved to build. It is cumbersome, costly, slow,
no wonder. We haven't had a decent supply side response
on housing. So it's on transport, it's on a whole
(10:39):
myriad of things. So simplify the system so that when
the business sector's got a great idea they can implement
it quickly and efficiently and get on with the job
of producing more GDP.
Speaker 1 (10:50):
Okay, and look, I mean undoing and simplifying red tape.
Despite its very nature, is is not an easy thing
and requires a great deal of cooperation.
Speaker 2 (10:59):
Because they're a best interest that will have the who
love who hide behind men take They love it because
it keeps them employed.
Speaker 1 (11:06):
Now we are entirely out of time. The main thing
coming up this week, because we do like to look
at the week ahead, it is the Economic round table,
just taking in less than a minute. Last week, it
was a massive week for the economy, wasn't We had
the RBA meeting, we had wages data come out, and
we had labor force figures, RBA rates decision was expected.
(11:28):
Is the labor force data that we saw last week
is that strong enough to delay the next rate cut.
Speaker 2 (11:35):
Do you think the short answers no. The Governor, when
she announced the rate cut on Tuesday last did sort
of signal that the expectations of the bank are and
it was included in their forecast for a couple of
more rate cuts over the course of the next six
to nine months. So timing is the question, not the direction.
The labor market numbers were actually quite good. They were
(11:56):
in the groove, if you know what I mean. We
had wages growth at three point four percent, so that's nice.
We had twenty five thousand jobs created, pretty good. The
unemployment rate, having ticked up previously ticked back down to
four point two percent, so they don't derail that strategy,
if we can call it that of the bank to
trim rates in the months ahead without picking the exact month.
(12:17):
But it's sort of one of these ones where you are,
we are we getting through this position and I've been
critical of the RBA, but maybe maybe I'm wrong, maybe
the Bank's right. And you know, if we look back
in another six months and say, well, gee, we got
through this inflation problem, the deflation issue that has now
eventuated with unemployment chopping out at four point three four
(12:39):
point four percent. Not bad.
Speaker 1 (12:41):
All right, Steven, have a great week.
Speaker 2 (12:43):
Thank you, Michael.
Speaker 1 (12:44):
That was a kind of a Stephen coculis better known
as the Kirk. You can find him at the kouk
dot com that's th ko uk and follow him on
X using the handle of the Kirk. I'm Michael Thompson
and this is Fear and Greed.
Speaker 2 (12:55):
Q and eight
Speaker 1 (13:00):
Y
Welcome to Fear and Greed Q and A, where we
ask and answer questions about business, investing, economics, politics and more.
I'm Michael Thompson, and today how do we solve the
productivity crisis? Every Monday morning, we're joined by economist Stephen Coacoulis.
You'll find him at the kook dot com and on
x using the handle the Kook. Stephen, Good morning.
Speaker 2 (00:25):
Very good morning, Michael.
Speaker 1 (00:27):
So let's start with productivity because there's a lot of
things I want to talk to you about, but productivity
it is, well, it's the buzzword of the week, right.
We've got the Productivity round Table, or the Economic Reform
Roundtable starting in Canberra tomorrow. And productivity really came up
in a big way last week when we had Reserve
Bank Governor Michelle Bulloch calling it out as being the
big challenge revising down forecast. But it's not the RBA's
(00:50):
job to fix it. That's that's government. So let's start.
Let's unpack all of this. Why does productivity matter so much?
Speaker 2 (01:01):
In a nutshell, productivity is the way that we improve
our living standards. So if we as a society, as
an economy can produce more output that means that we're
getting more national income and that is difided between corporations
and the workers. That's sort of one of the distributional
(01:22):
issues about productivity. But over time, and look at the
productive is not one of these things that you get
a sugar hit in one year. It's one of these
long run structural things that if you've got an efficient
economy that's innovative, that's got a competitive tax system, it's
got a competitive labor market with skills and knowledge and
education needed to undertake this new technology, something that's really
(01:45):
pertinent right now, you will get more economic output for
the level of capital investment and your labor, your workers.
And that's how productivity improves the living standards of all people.
And it's been you know, it's been lacking the last
decade decade and a half or so, it's been very
(02:05):
very weak, whereas back in the day, if we can say,
pre two thousand or something, we were having really solid, strong,
sustained lifts in productivity.
Speaker 1 (02:14):
Okay, in that case, how is it measured? Is it
a case of you referred to economic output and is
it a kind of a combination of these various factors,
and in doing so, you're able to determine what is
the productivity rate?
Speaker 2 (02:29):
Michael, that is a really challenging question. I'll tell you
how it's measured. Now. Whether this is the way that
the Bureau of Statistics capture is another issue. But it's
basically GDP the economic output of an economy. So that's
both widgets and tons of wheat and tons of iron
ore and buildings that are erected in those sort of things,
(02:50):
plus the wage that people in services get. So the
IBA governor, the productivity commissioner, so what's their output. It's
assumed to be their wage, So that's how it's measured.
It's the number of hours worked in the whole economy.
So that's what thirteen to forteen million people times thirty
three hours a week or whatever it is, times the
(03:11):
economic output that gets your productivity. Now, if I can,
if you can indulge me just one moment here, please,
because this is one of the things that is I
think creating a problem for this productivity summit this week
is that some industries, and as we move towards the
services based economy, some industries it's very very difficult to
(03:34):
measure productivity, and they are predominantly services. This is not
to say that services aren't productive on the contrary, but
it's measuring it. How do you mention the productivity of
a firefighter? How do you mention the productivity of a
test cricketer? How do you mention the productivity of a
journalist an economist? It's very very hard. Is it more reports?
(03:54):
Is it more fires? For a firefighter? Is how do
you mention the productivity of a priest you know? Or
a librarian. There's a whole lot of industries where it's
difficult to get a full measure and I think that
as we've moved to a service as economy that might
be distorting these measures as well. Not saying productive is
not unimportant. It is important, but there are issues of measurement.
Speaker 1 (04:16):
So is it?
Speaker 2 (04:16):
Then?
Speaker 1 (04:17):
In some of those examples that you gave, are there
occupations in industries where it is not just hard to
measure but also hard to improve it because there is
only so productive. You can only be so productive at
a particular job.
Speaker 2 (04:31):
One other example is sort of like age care and
nurses and cares. If you like that, how do you
judge the output all the productivity of a nurse in
intensive care he or she's got to look after these
people who are obviously in a bad way. And if
all they're doing is looking after them, which is a
job to sort of say, well, I'm going to spend
(04:52):
a bit less time looking after this poor person has
just had heart bypass surgery. I'll spend a bit more
time somewhere else. Will know that'd be more productive. Definitely
it would be, But it's not the sort of way
that you improve productivity. So for some industries, as you mentioned,
and that's just one example, not only is it difficult
to measure, it's difficult to achieve. And sure you can
have better computer systems where you write down the notes
(05:14):
of the patient with their blood pressure and pulse machines
and all this other stuff, but that's that's more for
the patient care. I don't think that improves necessarily the
output of the nurse or the care.
Speaker 1 (05:26):
There's not exactly a wholesale change. That's not going to
be an enormous improvement overall.
Speaker 2 (05:32):
And if I can answer this, say too, March, because
this is another example which I like to use and
it does really hit home how productivity does work. Think
of an iron ore field in the pilbra in Wa
you've got ten workers with a pick and a shovel
and a wheelbarrow. They're not going to dig out a
lot of iron ore, are they? For the ten workers.
If that company invests in machinery and equipment and a
(05:55):
rail line that takes the big diggers and trucks and
things ten workers, you would get an incredible lift in
the tonnages per worker. So capital investments in another important
part of that productivity equation. That one is easy to understand.
You know, nurses and teachers. If you have a class
size of fifty children rather than twenty, sure that's more productive.
(06:19):
But you know, as a parent who will used to
have kids going to school, I want a good parent
teacher ratio so my children and all the other children
in education get a really good quality of care and learning.
Speaker 1 (06:31):
So you mentioned, though that the productivity challenge that we
face at the moment is not a new one. It
hasn't just come up this year or in the last
couple of years. It's been around now for decade, fifteen years.
But it does appear certainly not going anywhere. How much
pressure then is on this productivity roundtable, the economic reform roundtable,
(06:53):
but it is about productivity really how much pressure on
it is there to actually have something meaningful come out
of it that's going to give us a boost. And
what happens if we don't get something? Is it this
handbreak on economic growth?
Speaker 2 (07:07):
It is something that has to be done that there's
got to be a change. And we've seen all the
submissions or many of the submissions from the union movement,
from the Business Council, from the think tanks that are
going to be there, and a lot of other academics
and politicians of course, and they're the ones that are
going to implement the reforms needed. So I'll just take
a step back again. Everything that's going to be on
(07:28):
the table at the Productivity Summit, the Economic Summit will
require the government to implement those changes. They don't happen magically.
This is where we have the politics versus policy dilemma
coming in. You know, we know what things improve productivity.
We can have a chat over the next hour about
(07:51):
what improves productivity and we know what they are. However,
we the electorate often shy away from it, which means
the politicians shy away from it because if they meant
this change, they'll lose the election. So it's important that
Jim Chalmers is the Treasurer and the other ministers of
the working on this productivity and the recommendations that come
(08:11):
from it, actually spend time talking to the Electric through
the media, through their high profile, selling the story if
you like to get this productivity reformed through So yes,
they have to do something. And it ranges from skills
education and training, red tape production, making tax system more efficient.
(08:32):
So there's a myriad things that we sort of know already.
It's just having the ability, the wherewithal and the sales personship,
if we can call it that, to sell it to
the Electric so that we vote for them to implement
it next election.
Speaker 1 (08:46):
Okay, I'm going to put you on the spot here
and just imagine that you were, in fact the Prime
Minister and you weren't worried at all about re election,
that you were going to be retiring. So it doesn't
matter what the Electric thinks of you. If there was
one thing that would give the greatest improvement to productivity
moving forward, because if you say this is not a
(09:07):
quick fix, it's a long term thing. What would be
the one thing that you would change.
Speaker 2 (09:14):
The one thing that I think yields. The most thing
is i'll call it red tape, duplication of services between
the federal, state and local government sector. So for example,
we have a federal Department of Health and six and
two territory departments of health and departments of education and
(09:34):
road rules. So if I drive across the border from
New South Wales to Victoria, there's different road rules. If
I just move from Aubrey to Wodonga, I've got to
go through and change my driver's license and car regio.
All of that sort of stuff is and that's just
a micro example, just by the way. I don't think
that's going to fix the whole productivity issue, but we
have state and territory and local governments. This building is
(09:56):
construction is a really hot topic too, which will be
at the summit this week. Is just really getting rid
of impediments to businesses doing stuff and so tax reform, yeah,
that will help a little bit. Skills education and training
is another one that I wouldn't discount either. So I'm
probably giving you quite a few answers, right, but it's
(10:18):
really this. It sounds a bit cliche, but the red tape,
the regulation, the duplication of services, you're getting a block
of land, getting a dwelling approved to build. It is cumbersome, costly, slow,
no wonder. We haven't had a decent supply side response
on housing. So it's on transport, it's on a whole
(10:39):
myriad of things. So simplify the system so that when
the business sector's got a great idea they can implement
it quickly and efficiently and get on with the job
of producing more GDP.
Speaker 1 (10:50):
Okay, and look, I mean undoing and simplifying red tape.
Despite its very nature, is is not an easy thing
and requires a great deal of cooperation.
Speaker 2 (10:59):
Because they're a best interest that will have the who
love who hide behind men take They love it because
it keeps them employed.
Speaker 1 (11:06):
Now we are entirely out of time. The main thing
coming up this week, because we do like to look
at the week ahead, it is the Economic round table,
just taking in less than a minute. Last week, it
was a massive week for the economy, wasn't We had
the RBA meeting, we had wages data come out, and
we had labor force figures, RBA rates decision was expected.
(11:28):
Is the labor force data that we saw last week
is that strong enough to delay the next rate cut.
Speaker 2 (11:35):
Do you think the short answers no. The Governor, when
she announced the rate cut on Tuesday last did sort
of signal that the expectations of the bank are and
it was included in their forecast for a couple of
more rate cuts over the course of the next six
to nine months. So timing is the question, not the direction.
The labor market numbers were actually quite good. They were
(11:56):
in the groove, if you know what I mean. We
had wages growth at three point four percent, so that's nice.
We had twenty five thousand jobs created, pretty good. The
unemployment rate, having ticked up previously ticked back down to
four point two percent, so they don't derail that strategy,
if we can call it that of the bank to
trim rates in the months ahead without picking the exact month.
(12:17):
But it's sort of one of these ones where you are,
we are we getting through this position and I've been
critical of the RBA, but maybe maybe I'm wrong, maybe
the Bank's right. And you know, if we look back
in another six months and say, well, gee, we got
through this inflation problem, the deflation issue that has now
eventuated with unemployment chopping out at four point three four
(12:39):
point four percent. Not bad.
Speaker 1 (12:41):
All right, Steven, have a great week.
Speaker 2 (12:43):
Thank you, Michael.
Speaker 1 (12:44):
That was a kind of a Stephen coculis better known
as the Kirk. You can find him at the kouk
dot com that's th ko uk and follow him on
X using the handle of the Kirk. I'm Michael Thompson
and this is Fear and Greed.
Speaker 2 (12:55):
Q and eight
Speaker 1 (13:00):
Y
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