"The consequences of Australia's deteriorating productivity are being felt right across the economy. Unsustainable wages growth, cost-of-living pressures, stretched public budgets and weakened industrial competitiveness are the result of our productivity weakness. Policymakers urgently need to demonstrate the will to turn things around," said Innes Willox, Chief Executive of the national employer association, Australian Industry Group.
"Productivity growth averaged 1.2 per cent a year in the decade before the pandemic, but since 2020, it has limped along at just 0.2 per cent. That is not a blip – it is a structural decline that touches every part of the economy, from construction and manufacturing to healthcare and education. Both the Reserve Bank of Australia and Treasury have already downgraded their long-run productivity assumptions and economic forecasts as a result.
"The causes are multiple and the solutions must be too.
"Regulatory burden is one of the most corrosive forces holding us back. In the care economy, construction sector and across our supply chains, fragmented and overlapping rules are consuming resources that could otherwise drive innovation, workforce development and service quality.
"Business taxation is also working against us. Australia's effective company tax rate is the second highest in the OECD, deterring the foreign investment we need in clean energy, advanced manufacturing and technology.
"A nationally operating business faces over 100 taxes across federal and state jurisdictions. That is not a system designed for productivity – it is a system designed to turn businesses into compliance machines.
"Our ports and freight networks tell a similar story. Stevedores have increasingly pivoted their profit models away from competitive shipping-line business toward captive landside charges on trucking operators – with terminal access charges far outpacing actual capital investment. Operating profits have reached record highs, not because of improved productivity but because of unchecked market power.
"On workplace relations, the avalanche of legislative changes in recent years has focused on delivering secure and better-paid jobs, but has largely ignored whether those outcomes are actually sustainable. Productivity cannot be legislated into existence – it has to be earned through workplaces that are empowered to innovate, bargain genuinely and reward performance.
"None of this is insurmountable. Australia has lifted productivity before, and the policy levers are well understood. Our submission to the Select Committee on Productivity outlines some sensible recommendations:
- Improve measurement of nonmarket sector productivity by enhancing ABS resourcing and methodologies to better capture outputs and quality in health, education and public administration.
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Prioritise productivity improvement in the nonmarket sector, recognising its growing share of GDP and its underperformance relative to long-term trends.
- Reform poorly designed regulatory frameworks to reduce compliance burdens, remove fragmentation and enable productivity enhancing investment and innovation across industries, including care, construction and regulated product markets.
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Streamline and harmonise Care economy regulation, including national worker screening, integrated audit cycles, aligned regulatory schemes and productivity enabling funding arrangements.
- Improve national consistency in the National Construction Code and embed evidence-based assessment of regulatory changes to reduce implementation burden and lift construction productivity.
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Accelerate creation of a seamless single national market through nationally consistent product regulation (e.g. EESS), harmonised compliance processes and broader cross sector alignment.
- Strengthen adoption of international technical standards by establishing clear principles for alignment, consistent implementation across jurisdictions, improved accessibility and enhanced Australian participation in standards development.
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Clarify ESG supply chain compliance expectations by providing consistent regulatory guidance, enabling appropriate industry collaboration, and creating an ACCC class exemption to support coordinated modern slavery due diligence.
- Enhance foreign investment transparency and predictability by publishing anonymised decision summaries to strengthen confidence in the national interest framework.
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Redirect underutilised National Reconstruction Fund capital to expand the Australian Business Growth Fund, enabling faster deployment of SME growth finance through an established and effective investment mechanism.
- Support business adoption of Industry 5.0 technologies by establishing a National Technology Uplift Network to accelerate digital capability, technology diffusion and productivity gains.
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Encourage business investment in artificial intelligence by scaling AI adoption programs, strengthening workforce capability and investing in AI-enabled compliance tools to reduce regulatory burden.
"We need the political will to pull these levers and improve productivity, which then means higher living standards and wages for every Australian," Mr Willox said.
