Productivity growth is a lot like Dudley Warner’s line on the weather – it is a matter about which a great deal is said, but very little done.
And there will be a very great deal said about it at the jobs and skills summit, much of it self-serving tosh.
Oh yes, it is a truth universally acknowledged that a country in possession of good fortune must be in want of a good education system. Or more accurately, a country wanting to sustain good fortune must pursue broad and excellent education for all people to the best of their ability.
If the summit helps clear the way for greater and quality investment in education at all levels, it will be a fine thing and will eventually help lift productivity.
Even most leading economists think education is a priority.
And if the summit helps clear the visa mess left by the Morrison gang and comes up with a better and intelligently targeted migration policy, that could also help a bit (albeit with reservations that I will come back to).
But the bottom line on our perceived productivity underperformance is that Australian business collectively hasn’t needed to invest to get comfortably richer.
Comfort zone
People and businesses generally tend to only do what they have to do to be comfortable.
Australian business, key elements of it basking in modest degrees of comfortable competition if not oligopolies, loves talking about productivity growth but hasn’t felt the collective need to invest more in it.
It’s only when business is forced to be smarter, to be more efficient, to invest in its own productivity growth, that we will see much change.
Non-resources business has been on an investment go-slow for three decades, as shown by this graph lifted from the RBA chart pack.
Take out the minerals boom that lifted Australia’s wealth and business has been comfortable investing proportionately less while profiting proportionately more.
And, yes, that “more” has been at the expense of labour getting “less” of the economic pie.
It’s an economic mantra that we can only have sustainable real wages growth from productivity growth – but our wages growth hasn’t been keeping up with the productivity growth we have managed.
The Productivity Commission came up with a graph recently that seemed to say real wages have grown faster than productivity growth. That would come as a big surprise to those with lived experience, but that didn’t stop business lobbyists loving the PC graph.
Too bad for business that the graph was faulty. Greg Jericho, policy director at the Centre for Future Work, comprehensively filleted the Productivity Commission’s construction.
Work smarter
No names no pack drill, but talking with a group of executives from various companies involved in automation and utilities, one volunteered that customers were having to “buy” productivity. That strikes me as a very fine thing – about time they did.
And then there is the matter of our growth industries being among the most labour intensive – health, aged care and child care.
(Bemusing to see the business lobby relaxed about the need to pay nurses and carers more – they know it’s the government that will end up footing most of the bill.)
Business is used to asking government to fix its problems for it. A grant here, a tax break there and pretty soon you’re talking serious money for not that much in return.
At the extreme for such behaviour is Qantas – our biggest corporate welfare recipient. It’s far from alone.
And it is in the DNA of governments of both stripes to want to be seen to be helping. Treasurer Jim Chalmers and colleagues were at it on Monday with draft legislation for more small business tax breaks – a handout for training and the “uptake of digital technologies”.
(If small businesses weren’t making the most of the various COVID handouts to buy new laptops, I suspect they never will.)
COVID boost
Right now, business overall is doing quite nicely in the COVID bounce back. Not all businesses, obviously, and not all industries – it never is “all”.
Yet the Labor government is following in the footsteps of the Coalition in planning more grants and subsidies. Beware the billions talked about for manufacturing – the motherhood status of “making things you can drop on your foot” is a worry.
I’m not convinced the Commonwealth gets a fair return for its largesse.
The consultants and accountants who are professional grant application writers do well and gifts to the bottom line are always welcomed by shareholders, but if businesses need governments to lead them by the hand to being more productive and profitable, they can’t be much to start with.
Cue the horse trading over migration that seems to have been done ahead of the summit.
Business wants its problems fixed as easily as possible by being able to buy other countries’ investment in talent.
There are workers we need more of to become more productive, whose migration here will allow one and one to add up to more than two – but the business lobby just wants to fill immediate holes, not caring if per capita GDP goes backwards as long as total GDP grows.
Visa mess
At the Press Club on Monday, Prime Minister Albanese was right to criticise the way his predecessor abandoned those in Australia on temporary visas when COVID hit.
“It probably wasn’t the wisest decision during the pandemic to tell everyone who was a temporary visa holder to leave, and to provide them with no income and no support, which means many of them have left, with ill feeling towards Australia and that spreads around,” Mr Albanese said.
But we wouldn’t have an unemployment rate of 3.4 per cent, we would not have as sharply reduced the number of long-term unemployed, if we had acted more humanely.
The real-time immigration experiment conducted here during COVID should teach us to be smarter about what we do next.
There is low-hanging fruit – scrapping the rich folks’ buy-a-visa program, for example – and the bottom line remains that Australia has gained and will continue to gain by sharing its wealth of opportunities with new arrivals, but our migration program should not be set by business lobbyists wanting a quick fix, business that might need challenges to encourage it to invest in everyone’s future.
