The 2023 intergenerational report finally saw the light of day yesterday after being selectively dropped to media outlets throughout the week.
Presumably the strategy was to keep the policy issues at the heart of the report in the media cycle for days rather than dumping them all at once where they’d get five minutes’ attention before everyone moved on.
While that produced the unusual sight of the press gallery actually having to talk about substantive policy issues, it didn’t facilitate any actual debate, because the contents of the report were unavailable. Anyone actually interested in productivity, participation, population, climate change and the myriad other issues covered in the report had to rely on journalists, rather than being able to see the document themselves.
As we’ve seen with the utter failure of both political journalists and many economic journalists this week to properly cover the latest Business Council screed, relying on journalists for informed debate is a foolish thing to do. And that’s not entirely unrelated to a key element of the report that has received virtually no attention — for the very good reason that much of the media, and business, don’t want to talk about it.
As one of the three Ps central to every IGR since 2002 — and as a topic over which there has been regular gnashing of teeth and rending of garments in economic op-eds for the past couple of years — productivity naturally occupies considerable space in the latest iteration.
Indeed, the biggest “news” in the report is Treasurer Jim Chalmers’ decision to use a lower productivity assumption based on the past 20 years’ average, not the 30-year average previously used. That in turn has fed into lower predicted economic outcomes across a range of indicators, giving commentators more opportunity to talk about the need to lift productivity. Interestingly, despite the lamentations about productivity, the 10-year average is actually higher than the 20-year average, because the period 2004-10 saw such poor productivity growth — thank you, John Howard and WorkChoices.
As the report notes, however, declining productivity growth isn’t merely an Australian problem — it’s common across Western economies. If anything, Australia has got off more lightly: our productivity growth average over the past decade, while lower than the 30-year average, is higher than the US, Japan, Canada, Germany and other European countries.
What all Western economies have in common — and you’ll be able to increasingly include China in this — is an ageing population and a steady expansion of the services side of the economy, particularly around health and social care, which are far harder to measure for productivity and in which traditional productivity indicators might not even be appropriate.
But where has the “productivity debate” been centred this week? Look no further than the witless editorials of The Australian Financial Review, demanding reforms to boost productivity. Two sentences from Tuesday sum up the view from the business lobby and its media cheerleaders: “The care economy — such as disability services and aged care — is more a cost than a source of any productivity revival. The government needs to stop ruling out obvious changes in areas like tax and industrial relations.”
Tax cuts and IR reform (never mind that WorkChoices actually smashed labour productivity) are what big business is demanding via the latest warming-over of the Business Council’s “economic reform” demands — a stale shit sandwich it’s been serving up for a decade with only the label on the shrink-wrap being changed.
Read the IGR and its section on productivity carefully, however, and you’ll see clues about where there are real opportunities for productivity-enhancing reforms:
Comparable productivity trends in other advanced economies suggests there are some shared reasons for the productivity slowdown. Many measures of dynamism, such as firm entry, exit and job-switching rates, have declined in Australia and overseas. Similarly, measures of market power, such as concentration rates and mark-ups, have increased in Australia and overseas. This has lowered business incentives to innovate and reallocate resources to more productive uses.
That is, curbing market power via more effective competition laws that reduce concentration and the ability of dominant firms to increase mark-ups will improve productivity — as well as increasing investment and reducing inflation. As the report notes, productivity growth continues to be strong in “frontier firms”, in contrast to dominant incumbents.
What is the government doing about this? “The government has also announced that treasury will review competition settings,” is all the IGR says. This is the treasury taskforce announced this week by Chalmers and Assistant Competition Minister Andrew Leigh to advise on strengthening competition laws.
But big business is opposed to any toughening of competition laws, which would stifle its ability to further concentrate markets by buying competitors (under the fig leaf of “increasing scale”) and widening what Warren Buffett calls the “moats” that protect its margins from being competed away. That’s why competition isn’t mentioned in the BCA’s wish list this week. And it’s why the Fin isn’t interested either (not to mention that fewer M&As would give it less business action to cover).
So across the week, the most important reform to boosting productivity has been ignored, despite the purported obsession by business and the media with addressing the “productivity crisis”.
Dare we hope that the treasury taskforce, advised by quality people such as Danielle Wood and Rod Sims, will deliver the kind of productivity-enhancing competition laws we need — or that the government will pursue them?
Well, the Albanese government had a recent test of its competition credentials: Qatar Airways applied to expand international capacity at a time when oligopolist and BCA member Qantas was profiteering and gouging international passengers. For reasons it has repeatedly tried to, and failed to, explain, it knocked Qatar back — most likely because of its overly close links with Qantas. In doing so, it spectacularly failed a very simple test of whether it was seriously interested in competition.
Does the treasury taskforce have the right stuff to make Australia competitive? Let us know your thoughts by writing to letters@crikey.com.au. Please include your full name to be considered for publication. We reserve the right to edit for length and clarity.
When the BCA, AFR, et all say productivity, what they mean is “profits”.
Productivity – real productivity, ie: more stuff out with less stuff in – is not going to improve while wages are being squashed, because there is no real incentive for business to improve efficiency.
Yep. Why have improvements in real productivity when it’s just easier to goose the books by pumping the population.
Exactly, they wilfully confuse productivity with profitability. And when they think profits they turn first to lowering wages rather than investing and innovating to get more from each labour input. And if they do succeed in that area they object to sharing the extra value created.
As well as competition law being used to drive innovation we should also be using wage increases. Rather than wait years for wage rises to follow productivity we should be lighting a bomb under management by reallocating profit share to higher wages. Want to maintain or grow profit, then increase productivity. We did this for years via centralised wage fixing, it allowed an economy always marked by weak competition to nonetheless grow. Instead we now have an economy marked by oligopoly, rent seeking and demands for ever more corporate welfare.
yes whilst women forced out of workforce by ageist ,sexist hiring gatekeepers- gaslit on 25 bucks a day and forced into indentured hell by orofiteering middlemen lobby got their snouts in the public services funding and in the ear of media
Or, another proxy for higher employee output for lower income….
Back in the day, I naively thought that competition was one of the keystone tenets in capitalism. Didn’t Adam Smith have something to say about this? If the big corporations operating in Australia don’t believe in competition, then what exactly is their philosophy, outside of self-interest, and how do they expect to be taken seriously?
In case anyone doesn’t know made almost 250yrs ago – “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary. —Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (1776).
His other much misunderstood quote was “the Invisible Hand of the Market” which appeared only twice in the 1,000 pages of his work and is not so much clutched at by drowning capitalists as waved like a banner of thrusting entrepreneurship – it actually specified that its alternative name “price discovery” can only work in a true free market which can never exist unless supervised by an external authority, ie government.
ironic govt make taxi drivers stop price gouging beyond the meter flag fall- yet dont apply that same standard to those who have infested our healthcare and government public services via lobbyist Trojan horses
Qatar was not on speaking terms recently with its neighbours due to Middle East politics, so the Emirates/Qantas alliance would have red-carded it. In fact, Qatar Airways is an excellent airline to travel with, from reports. I sincerely wish people would stop thinking of Qantas as Australia’s airline. It is an embarrassment. An albatross around the neck. But that is by the way.
Economists spew buzz-words like prayers in the cistine chapel – GDP, productivity, IR reform. Where have they got us? Have economists looked after the ecology, or equality, or taken steps to reduce climate change with 5° staring us in the face? Perhaps they’re looking forward to the economics of rebuilding all our coastal infrastructure on higher ground (Sydney, Melbourne). There’ll be a big rise in GDP demolishing the old lot. “It’s the economy, stupid” is taking us where we don’t want to go, but we march on, blindfolded, because our twisted interpretation of what the economy actually is is sacrosanct. Or are we all having fun paying the banks for their necessary $30 billion profits each year? Or slagging off at the people who can’t afford a deposit, blaming them for our greed?
We used to be a top spot for UFO visits, aliens dropping in to see how we’re going. But no longer – we’re now far too depressing.
Sea rise will shut down the ports first, of course, so no new cars…
For a couple of generations now SAL has been Australia’s favourite airline, Qatar catching up and the latter kept flights going through Covid, often the only choice…..
Now we know ” free trade ” has created oligopollies , duopoly and cartels and has ironically reduced competition in the microeconomy – either allow domestic competition or cease these cartels called ” free trade Agreements ( FTAS)
That bunch of neoliberal stooges in Canberra are about as likely to upset Qantas, Coles, Energex et al as their abject predecessors.
vote Greens or progressive independants – Or Australia’s sovereignty will be sold off to a bunch o multinational gougers
I crossed paths with Jennifer Westacott 30 years when she had a social conscience as a senior manager at Housing NSW. I worked for a small charity and she facilitated an innovative project where we wanted to develop a property to provide 10 self contained units for high needs clients using money left to the charity as beneficiary of a will. It wasn’t enough, but under Ms Westacott Housing NSW agreed to pay half and we each retained shared ownership. Every time I see or hear her being interviewed and she’s pushing the BCA hardline exploitation of the less advantaged members of society, I wonder what happened. Is it down as naked ambition, the political effect, to say what’s required to be said in the circumstances, ie her career profile, or is it her true value system? I still believe there could be a silver lining in there. It will be interesting to see if she speaks to her conscience after departing the BCA. An opportunity for a probing interview
Power corrupts…
you are spot on however what about Innes ? – why are particularly older women expected to be nicer than the boys up the top exerting all that competitive machismo energy ? its always blamed on older women when these scams are exposed