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“Productivity” might sound a nerdy word to many, but improving it is vital for a more affluent life for Australians in coming years. At the moment it is languishing.
Investigating ways in which our national productivity can be improved is at the heart of the work of the Productivity Commission, headed by Danielle Wood.
Wood is an economist and former CEO of the Grattan Institute. Picked by Treasurer Jim Chalmers for the PC job, she has already acquired a reputation for being willing to express forthright views, even when they don’t suit the government. She joins us today to talk about the tasks ahead, the commission’s work and some of the current big issues.
On Australia’s weak productivity numbers, Wood highlights what steps the government can and can’t take:
There’s a lot in productivity that’s outside of government’s control. So we sometimes talk about it like it’s something that government does to the economy. There’s a lot around technology, the pace of change and diffusion of change that are critically important for productivity that’s largely outside of government’s hands.
There’s no sort of single lever that you pull that makes all the difference. And, you know, if you looked at the Productivity Commission’s last big review of productivity released at the start of last year, you definitely get that sense.
If I was to pick just a small number […] of what I think are critically important areas. Sensible, durable, long-term market-based approach to climate policy that’s going to allow us to make the huge transition, including the energy transition that we need in the lowest possible cost way. That’s hugely important for long-run productivity. Housing: fixing the housing challenge and that’s got to go to some pretty serious work being done on planning policy, which I think is really important.
Then I would point to policies that support the rollout of new technologies. As I said before technological change is critical for productivity growth. So policies that build the right environment, particularly for big changes in technology like AI. So there you’re looking at the regulatory environment, your data policies, your IP policies. They all need to be working together.
If I can sneak in one more, I would put the government’s announcement that it will revitalise national competition policy, and I think that’s a really exciting one. And if it’s done well, if they can actually get the states to come to the table and agree on areas where we can reduce regulatory and other barriers to competition across the country, that’s a really important lever for getting economic dynamism moving again.
How has working from home has affected productivity?
Look, it’s a very big change, and you don’t often get these kinds of really sharp structural shifts in behaviour and in labour markets, and we’re still learning about it.
The research tends to suggest that hybrid work, so working at home sometimes and in the office sometimes, […] doesn’t seem to have negative productivity impacts If anything, slightly positive productivity benefits, and it has big benefits to individuals in terms of giving them flexibility, avoiding the commute and particularly for things like women’s workforce participation. I think it’s been really helpful and positively influential.
On the other hand, fully remote work, which is rarer - there is some evidence if you’re not ever coming into the office, you miss out on some of the spill-over benefits of sharing ideas, the kind of water-cooler effects, training and development.
I work from home one day a week, on Monday, and I do no meetings or calls on that day. And I do all my deep, deep work on Monday, and then the rest of the week I’m in the office and back to back.
With housing policy front and centre and a debate about whether changes to negative gearing and the capital gains discount should be made, Wood hoses down how much difference that would make:
It’s not a silver bullet on the house price front. There may be other reasons that you make those changes, particularly if you were doing a kind of broader base tax reform exercise. I would say that you’d want to have those on the table. But when it comes to housing challenges, there’s probably some bigger ones there. The ones […] around planning, around construction productivity, around workforce, are going to be more important in the long term to getting the housing challenge right.
Wood was initially had concerns about the Future Made in Australia policy. Now she says she now is pleased with where the government has landed:
Look, I’m certainly very pleased with the guardrails that the government have put in place. I think the publishing of the national interest framework, which puts a lot more economic rigour around the assessments of particular sectors looking for support, was a really important development.
Certainly puts my mind at ease that there is a lot of rigour around who gets support. Because as you said there is always a risk with these types of policies that we end up wasting money for supporting industries that don’t have a good case for economic support from the taxpayer.
Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
English (United States) ·