"We welcome that the Productivity Commission has again shone the light on the nation's central economic challenge – the need to rapidly uplift our flagging levels of productivity," said Innes Willox, Chief Executive of national employer association the Australian Industry Group.
"The Commission's latest report confirms there was an artificial productivity boost as lockdowns came off in 2021, which washed out as economic settings gradually returned to normal in 2022, and has since then gone nowhere. We are an economy standing still.
"The study identifies a lack of ongoing business investment as a clear problem. With the economy at its lowest ebb since the recession of the early 1990s, outside of the COVID years, businesses have not been confident enough in our economic conditions or settings to invest at anywhere near the level we should expect.
"If you don't invest in enough equipment, technology and skills to match your business activity, then productivity will logically suffer. The burgeoning trade war is adding yet more uncertainty to the outlook, making the prospect of productivity recovery in the coming year even less likely.
"Home building is a particular productivity laggard, declining dramatically in the past five years (down 28% for apartments and 6% for houses). Labour productivity in health care is down 11% since the pandemic. These are two key areas of our economy that need to see significant productivity uplifts to cope with growing demand.
"Falling productivity inevitably means higher costs for goods and services, which are a leading factor behind the housing crisis and the fiscal sustainability of our care sector.
"Many things contribute to productivity, but we cannot pretend the major changes in workplace relations have not been a factor.
"Some of the most damaging changes have directly impacted the two sectors where we have also seen productivity going backwards: the construction and care sectors.
"Nor can we disregard ever growing regulation and an incoherent and uncompetitive taxation system. Each of these issues impacting business competitiveness act as a millstone discouraging productivity and investment.
"A genuine productivity agenda targets not the low hanging fruit, but the highest yielding fruit, so we welcome the government declaring productivity reforms will be the centrepiece of their next term. The Productivity Commission's report reiterates that there is no time to waste if we are to retain a competitive, broad-based private sector in Australia," Mr Willox said.
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