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Low productivity growth impacts Australia’s workforce via incomes, employment levels and standard of living, so it’s crucial to address the issue and take steps to address this economic challenge.
There is a productivity problem in this country, and though there’s been much discussion on the topic, progress to fix it is slow.
Stephen Walters is Chief Economist at the Australian Institute of Company Directors (AICD). He says, “We have been lucky, and perhaps another boom will appear over the horizon.
“It would be wiser to assume, though, that we have run out of booms and need to focus instead on lifting productivity.
Walters indicates the task is difficult, but productivity and population growth are the only two long-term drivers of growth.
He says, “Business, educators and government need to be working together and all pulling in the same direction, [which is] a complicated task.”
The solutions to our productivity issues will be multifaceted. Addressing educational outcomes and encouraging people to gain the skills essential to future jobs is one of the keys to long-term change.
Walters notes that according to a recently released report from the federal government’s Productivity Commission, broad-based recommendations also include a focus on introducing measures to reduce chronic illness and increase workforce participation.
He says, “We need to be more innovative, reform our education system, collaborate more, better commercialise ideas, and improve access to capital, particularly for start-ups.”
Population growth is a major driver of potential output, our economic speed limit, but Australia’s fast-ageing population means we can’t rely on increasing numbers of workers to drive growth. Current population growth and advances in automation may not keep up with the rate of older people leaving the workforce.
Asking those who do work to work longer hours is also not sustainable. A workforce doing longer hours has the potential to contribute further to the chronic health issues and workforce participation problems which already need addressing.
The trick, says Walters, is working both smarter and harder. Seeking integrated reform which spans state and federal government, as well as the private sector, will create more meaningful change.
The AICD’s latest survey results for the Director Sentiment Index showed more than a third of respondents nominated productivity growth as an economic challenge for the nation. To address this, respondents seek long-term solutions: a renewed push for broad-based tax reform, more infrastructure spending, greater focus on fostering innovation and better standards of education.
Although the global economic outlook says 2018 will bring the best growth levels in eight years, Walters believes Australians need to be proactive and collectively seize their destiny to ensure economic growth in this country.
Walters says, “The payoffs from lifting productivity are very long term, so we need to move beyond a short-term focus.”
Stephen Walters was the guest speaker at a recent Michael Page breakfast briefing session, where Australia’s business leaders share their insights and experience. To take advantage of our economic experience in your own business, contact one of our expert consultants.
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