Ai Group welcomed the opportunity to provide further input into the Productivity Commission’s inquiry. We agree with the Commission’s arguments about the fundamental importance of productivity for Australia’s economic and social progress.

Raising rates of productivity improvement has become more important over recent years. The lower average rate of productivity improvement has stifled the growth of real incomes. This has many consequences one of which is the immediate issue of households and businesses less well equipped to absorb the sudden increase in inflation since the end of 2021. In a matter of months, a large proportion of real incomes growth over the past decade has been eroded by this bout of price pressures.

More importantly, Australia faces formidable challenges from the imperative to transition to net zero emissions in a short space of time; accumulating demographic pressures; and a fiscal outlook that requires both a faster growing tax base and more efficient taxation arrangements. Lifting the rate of productivity growth is a key contributor to addressing these challenges while still raising Australia’s living standards.