Uncle Thomas Coghill – thank you for that characteristically kind welcome to country.
I also want to acknowledge the elders, customs and traditions of the Jagera people from this side of the Meanjin, the Turrbal from the other side –
And express my gratitude to everyone here who is committed to the cause of recognition and consultation which is at the core of the Voice to Parliament that’ll be put to the people this year.
Towards the end of a week that’s already taken me to Sydney, Canberra and Perth, can I say how much I appreciate this opportunity to address CEDA again –
Especially on home turf, and in front of such a big and important crowd, full of familiar faces.
CEDA is an indispensable part of our national conversation and I’m really pleased I could accept this invitation. Thank you.
The last time I was here at the Convention Centre with Carolyn Evans, Griffith was naming Andrew Fraser the first alumnus of the University to be its Chancellor.
I thank Carolyn and Griffith for that, for supporting this gathering today, and for the introduction a moment ago.
As you can probably tell, I’m really proud of my association with Griffith and I’m pleased Andrew is also here today, as well as our other classmate Anthony Chisholm.
Thanks also to the Commonwealth Bank and TechnologyOne – the other sponsors of today –
And to all of you who’ve taken the time to gather and listen – I appreciate it.
There are a number of reasons why now is the perfect time to offer some perspectives on our economy.
One is that tomorrow I’ll be releasing the Productivity Commission’s five‑yearly review of Australia’s productivity performance.
So today I want to tell you what to expect, how the Albanese Government is grappling with its major themes and directions, what we are interested in progressing and where we think we already have a better way forward.
I warn you – it’s almost a thousand pages long, there are nine volumes, and 71 recommendations.
I received it last month and I’ve been getting my head around it and briefing my Ministerial colleagues on it since.
I’m not obligated to release it until after the Budget, but I’m putting it out there a couple of months early –
Because I want you to be able to work your way through it too, engage with it, make your own mind up.
And also, because so much of what’s happening right now goes to our ability to build a more productive and more prosperous economy, more stable and resilient and secure, and one that creates more opportunities for more of our people.
Every day this week we’ve been reminded of the big challenges laid out before us.
On Monday I convened a meeting of APRA, ASIC, the RBA, the Treasury and relevant ministers, to monitor and understand the implications and exposures from what’s happened to Silicon Valley Bank.
Our regulators are on top of things, our banks well‑capitalised with strong liquidity positions, but it’s still a reminder of the risks, uncertainties and vulnerabilities in the global economy as interest rates rise.
On Tuesday we announced the biggest industrial undertaking in our history, the new AUKUS deal, which is a crucial investment in our national security and our national economy.
It’s a game changing plan to broaden and deepen our industrial base –
But also, a reminder of the substantial pressures on the Budget that have largely come from the five fastest growing areas of government spending: interest costs on debt; the NDIS; aged care; health care; and defence.
The same day, and while I was in Perth, the new GST relativities were released.
These were a reminder of some other fiscal challenges – state and federal –
Including, in our case, the increasing cost of the deal to provide WA a GST floor of 70 cents –
And those that will come from the renewal of expiring national agreements, which need to be funded.
The interim Default Market Offer which was released yesterday and goes to forward prices in our energy markets, is another reminder of the inflation challenge we still confront even as it moderates.
Our interventions are working well to take some of the sting out of those price rises –
Which are less than half the size they would have been without our action in December –
But people will still be doing it tough as inflation hangs around in our economy – higher than we’d like, for longer than we’d like.
In the near term, our ability to withstand these inflationary pressures, these fiscal constraints and global uncertainties will come down to the best combination of relief, repair and restraint.
Responsible cost of living relief where we can afford it; repair when it comes to our supply side constraints; and restraint in the Budget.
That was the strategy of the October Budget – and these will be guiding principles in May as well.
But in the medium and longer term, our success will be determined by whether or not we can lift living standards –
And that will be determined, in turn, by whether we can put the woeful productivity performance we saw during the wasted decade behind us.
This won’t be easy or quick, but together, we can begin to methodically turn it around.
With a goal of improving productivity not for its own sake, but because of what it represents.
An expanded speed limit on our economy to enable and empower non‑inflationary growth –
And grounds for sustainable wage increases, which could lift living standards for working people in this decade and the next.
To do better we need to understand the dimensions of the problem.
Let me give you five facts from the report which puts it in perspective:
- First, our productivity growth in the past decade has been the slowest in 60 years, averaging just 1.1 per cent a year – worse than the decade before and barely half the rate achieved during the 1990s.
- Second, between 1970 and 2020, Australia slipped ten places in productivity rankings, falling from 6th to 16th in the OECD.
- Third, this means our productivity is now 22 per cent lower than the US.
- Fourth, if we’d kept up with the 60‑year average for productivity growth, national income would have been around $4,600 higher in 2020.
- And fifth, if we stay stuck on the current course, the PC projects future incomes will be 40 per cent lower and the working week 5 per cent longer.
These figures are useful illustrations of the productivity challenge – but they are not forecasts, or pre‑determined outcomes –
And later, I’ll come back to how we measure productivity and whether we’re approaching this the right way.
But it’s clear and it matters, that on every traditional measure of productivity Australia has been flatlining.
Australia has a productivity problem.
The report I’m releasing tomorrow refers often to the headwinds in our economy that contribute to this –
And it’s true that much of what we confront can be problematic if mismanaged or ignored.
But in a spirit of optimism, I want to suggest to you today that we can turn the headwinds identified by the PC into tailwinds.
The report does a good job of identifying five key trends and transitions:
- One, the large and growing services sector.
- Two, the costs of climate change.
- Three, the need for a more skilled and adaptable workforce.
- Four, our use of data and digital technology.
- And five, economic dynamism in a changed world of geopolitical tension and uncertainty which is putting up barriers.
These are hard areas for a reason.
All are complex, and none will respond to quick‑fix, easy win, whack‑a‑mole policy making.
In the PC view, the non‑market services sector, including the care economy – which has averaged zero productivity growth since 2000 – will naturally expand and drag on productivity as our population ages.
That transition will be happening in the context of another – a move towards net zero that will require billions of investment by 2050.
This will help us avoid some of the worst impacts of climate change and help create new sources of growth that will lift our productivity performance over time.
These transformations will require investments in a highly‑skilled workforce –
For that, we’ll require better education and training systems that can supply the skills and labour we need –
And which can enable the digital revolution to happen in a way that enhances rather than just replaces work – helping to diffuse ideas and digital technology across more of our economy.
All this, in the context of significant geopolitical uncertainty that will present its own headwinds if not handled correctly –
With serious fiscal constraints –
And with an economy that has become less dynamic over recent decades.
The Productivity Commission report you’ll see tomorrow proposes five ways to respond to all this in its “policy agenda for a more productive Australia”.
- One, building an adaptable workforce to supply the skilled workers for Australia’s future economy.
- Two, harnessing data, digital technology and diffusion to capture the dividend of new ideas.
- Three, creating a more dynamic economy through fostering competition, efficiency and contestability in markets.
- Four, lifting productivity in the non‑market sector to deliver high quality services at the lowest cost.
- And five, securing net zero at least cost to limit the productivity impact caused by climate change.
These groupings are useful to us, and they align pretty closely with what I’ve been talking about over the last nine months –
About the opportunities of the energy transition, the possibilities of data and digital, and the big shift to services – particularly the care economy.
Now obviously, no government is expected to pick up and run with every recommendation of the PC –
No government has and no government will.
In fact, precisely zero recommendations from the last five yearly review were fully implemented by our predecessors –
And half of these either involve or are exclusively for the states, which we’ll discuss with them.
But a major point I want to convey to you today is that there are more ways than one to satisfy our objectives when it comes to productivity –
Multiple pathways, and not all of them in the report I release tomorrow will be consistent with the government’s priorities or values.
We don’t believe productivity gains come from scorched earth industrial relations, for example, or from abolishing clean energy programs.
Instead, we’ll get productivity gains from investing in our people and their abilities –
From fixing our energy markets –
From making it easier to adapt and adopt technology so it works for us, not against us –
And by creating the stability and certainty necessary for capital to flow towards areas where we have advantages and opportunities to underpin a more modern industrial base.
We want to maximise opportunities in energy, not just minimise costs.
We want more cooperative workplaces, not more insecurity and conflict.
But I hope these points of difference don’t dominate the coverage, especially when there is so much common ground to be recognised and progress to be made.
Our government is working on more than two‑thirds of the 29 reform directives outlined in the report – and is methodically considering the specific recommendations.
Thirty‑six lie at least in part with the states – and I’ll be discussing these with my counterparts at our next meeting in June.
We already have a really comprehensive reform agenda to grow our economy and lift living standards by investing the right way in productivity growth.
Let me give you some examples.
To expand opportunities to work and learn in the future economy we are putting in place:
- Cheaper child care and better paid parental leave, building a bigger workforce by making it easier for parents to work and earn more.
- 480,000 TAFE places and 20,000 additional university places in areas of particular need.
- A University Accord that will drive lasting improvements to higher education.
- A National Skills agreement to reform VET.
- Jobs and Skills Australia – to strategically plan for the workforce of the future.
- And a Digital and Tech Skills Compact to enable tech workers to earn while they learn.
We’re creating the conditions for more diffusion of digital technology by:
- Expanding access to high‑speed internet by allocating $3 billion to upgrade the NBN –
- With $1.6 billion of this total dedicated to improving connectivity in regional, rural and remote Australia.
- In addition to $656 million to address other connectivity issues in rural and remote Australia.
- Paired with our cyber‑security strategy.
- And expanding use of Digital ID to make it easier for Australians to access more than 125 government services.
We’re making our economy more dynamic with:
- A sustainable finance agenda to enable capital to flow more effectively and efficiently.
- Working with the states and territories to expedite zoning planning and land release as part of the Housing Accord.
- Modernising cross‑border processes and reducing compliance costs in trade.
- Deepening commercial relationships across the Asia‑Pacific.
- Creating room for more skilled migration by slashing the visa backlog.
- Through our Migration Review.
- And through work to support business adoption of AI and other new technologies.
We’ve got a big focus on services, and the care economy:
- The Strengthening Medicare Taskforce will enable GPs, nurses and allied health professionals to work together for better patient outcomes.
- We’ll have more to say about our review of the NDIS in this term of government.
- And we’re also exploring new funding models to promote better public outcomes, including through place‑based approaches.
And we are building new partnerships for productivity:
- By revitalising bargaining.
- Through a focus on grasping the industrial opportunity of net zero, including through the National Reconstruction Fund.
- And through AUKUS – an investment in our national security, and our national economy, that will support 20,000 jobs in sectors like technology and advanced manufacturing.
All of this shows that across each of the five areas of reform identified by the PC, the government is acting in methodical and meaningful ways to turn our productivity performance around.
I said earlier that I’d talk about how we approach and measure the productivity challenge –
So that’s what I’ll finish with today.
At the start of January – and later in a longer essay – I flagged my belief that we can improve, bolster, and make more relevant, the way the PC goes about it’s really important work –
All without interfering with its independence, or its core focus on productivity.
The PC has played an important role in economic reform over a long period of time.
But it’s structure and remit have not changed for twenty‑five years – and our productivity challenge has evolved.
To elevate the economic reform discussion, we need to ensure we’ve got a PC suited to the times.
This could mean a more strategic focus on how we maximise opportunities in areas of economic transformation, including the shift to net zero.
It could mean building a better understanding of how we measure productivity and the magnitude of the challenge.
What it must mean, is the evolution of a more meaningful, expanded research agenda and a stronger reform blueprint.
This is something I’m giving further thought to, and will have more to say about, later in the year.
We all want to turn headwinds into tailwinds.
We all want better living standards.
We all recognise the central role of productivity growth in that effort.
How we go about it is contested, as it should be when so much is at stake.
That’s why so much of our government’s time and effort has been spent building a serious reform agenda here –
One that can pair better productivity with a full employment economy that offers more opportunities, to more people, in more parts of the country.
The PC’s report will assist us to refine and define the way we move forward.
But improving productivity isn’t one government’s task –
It’s a national one, with business, investors, all levels of government, workers and their unions, pulling together in meaningful ways on multiple fronts – to move further and faster towards our destination and collective mission:
Improved living standards for our people, decent incomes – and a better, more secure and productive future, built together.
Thanks very much.