5 Key Strategies for Productivity Growth in Australia

Australia’s productivity has stagnated due to weak business investment, declining dynamism, slower technological payoffs, and a meek appetite for economic reform.

Policies to improve productivity gains should focus on five broad objectives: streamline regulation, remove distortions in the tax system, invest in high-impact infrastructure, promote competition and develop an adaptable training system that sets workers up for the future.

Australia’s Economic Reform Roundtable kicks off in Canberra this week. The discussions will bring together business, policy and community leaders to chart a path to stronger productivity growth. Last week, we delved into Australia’s productivity challenges and the case for reform. In this piece, we go a step further, detailing the reasons behind Australia’s productivity problem and what policymakers can do to fix it.

Reform framework

• Streamline regulations and unify markets: Harmonise regulations across states and territories to cut red tape. One national framework for key regulations would prevent fragmentation and remove overlapping rules. In turn, businesses could spend less time on compliance and more time improving and expanding their operations.

• Build an efficient tax system with minimal distortions: Restructure the tax system with broad bases and low rates to minimise economic distortions. Poorly designed taxes can favour certain assets or industries, leading to overinvestment in less productive, tax-favoured areas and underinvestment in more productive uses. Stamp duties on property are a prime example. The tax discourages mobility and locks resources into less efficient uses.

• Invest in high-impact infrastructure: Remove politics from infrastructure projects and ensure that developments are allocated to areas that will yield the greatest return or are in the most need. A good place to start would be in streamlining planning approvals and better coordinating projects across jurisdictions.

• Promote a dynamic labour and skills market: Overhaul education and training to meet future skill needs by aligning industry, vocational programs and universities with modern economic requirements. Prioritise easing occupational entry regulations, recognising prior learning, incentivising SME training, expanding industry-delivered qualifications, and creating a national core skills guarantee.

• Increase competition and remove business barriers: Foster competition to drive efficiency and innovation. Strong competition policies (enforcing anti-monopoly rules and easing new business entry) push companies to improve and become more dynamic.