Australia a living testament to the benefits of productivity growth
-Professor Stephen King, Monash University An average worker today puts in 14 fewer hours per week and takes home a real wage six times that of the average worker in 1901 – all because we are producing more per hour worked. And yet in the past decade that rate of improvement has slowed. Over the 60 years to 2019-20, labour productivity (production per hour worked) grew at an average of 1.8% per year, which sounds small but compounds each year. In the most recent of those decades, the decade to 2020, growth fell to just 1.1% – a drop of one-third. If it remains that low we will be much worse off in decades to come than we would be if we could get back to the kind of growth we had. That’s one of the reasons I was excited to work on the Productivity Commission’s second five-yearly productivity report, released by Treasurer Jim Chalmers. Victims of our own success In some ways, Australia has been a victim of its success. It has a robust and highly productive economy, especially in mining and agriculture where it is among the world’s leaders. But, as productivity growth in mining and agriculture has made us wealthier, we have demanded more services, such as holidays, housecleaning, childcare and after-school care, gyms and home-delivered food. Now employing 90% of our workers and accounting for 80% of our economy, services are harder to make more productive, and as our population ages they are likely to account for an even greater share of what we do. In government-funded non-market services such as health, education and public administration, measured labour productivity growth has been close to zero since the turn of the century. If we want to continue to improve our standard of living, we are going to have […]