Australia faces challenges—like all other countries—amid global uncertainties. Yet it also needs to confront its own: In the past ten years, productivity growth has slowed, incomes have stagnated, and the high cost-of-living pressures have strained its population. Australia needs to create the right conditions for productivity growth. In this Future of Asia video, Ben Stretch and Chris Bradley talk about five big tests that must stay front of mind when addressing the productivity issue.
Chris Bradley: Australia has coasted on good fortune since the 1990s—but, in fact, today we are no better off than a decade ago. Productivity growth is the key to restarting our nation’s engine, yet we have been going backward in this regard.
Ben Stretch: As a result, productivity has now surged to the top of our national agenda. To fix the levels of productivity in Australia, we need to triage and focus on what matters, grounded in evidence. Here are our five big tests to ensure the emerging national productivity agenda delivers real impact.
Test 1: Unlocking investment
Chris Bradley: Productivity growth has been stagnant since 2016, caused by an investment slowdown. In the past decade, growth in hours worked doubled, but capital growth halved. We’re just not backing our work with enough capital. To restore healthy productivity, Australia needs an extra AU $130 billion in private investment annually by 2030. There’s no shortage of global capital, so test one is whether we can make Australia the best place in which to invest. Productivity can be a fuzzy concept, but AU $130 billion makes it concrete and requires big moves by big firms. We need to act fast.
Test 2: Prioritizing key sectors
Ben Stretch: The three sectors critical to our investment economy—construction, utilities, and finance—are productivity laggards. The second test is whether the national agenda prioritizes actions to make Australia a great place to build, to energize, and to finance. For example, we once had world-leading gas and electricity prices for industry, but no longer. These sectors are vital for a competitive economy, yet regulation has somewhat stifled productivity.
Test 3: Smarter regulation
Chris Bradley: In prosperous times, regulations grew issue by issue. Restrictive rules on Australian businesses have risen by at least 50 percent in the past 20 years. But has this made us better off? The reality is that most productivity growth comes from a few standout large enterprises. The third test, then, is whether Australia can create a regulatory environment in which productivity champions can really thrive.
Test 4: Balancing the nonmarket sector
Ben Stretch: The nonmarket sector—education, health, aged care, and public services—has been growing over twice as fast as the market sector but has seen little measurable productivity growth in 20 years. In the past three years, two-thirds of new jobs were publicly funded. These sectors are vital. The fourth test is about finding the right balance: slowing input growth while unlocking productivity to make Australia’s economy work as a whole.
Test 5: Building a productivity compact
Chris Bradley: Australia’s golden era [1993–2016] bred complacency, but fixing productivity isn’t just luck. The fifth test is whether we can forge a compact among all players—business, government, and society—to prioritize productivity. Australia’s stagnant performance stems from letting productivity slide; reigniting it demands tough choices and a shared commitment to collective progress. Productivity is the goose that lays the golden eggs—we must nurture it, not strangle it.
Ben Stretch: In summary, Australia is facing a productivity crisis that’s hitting living standards. We need a bold national agenda, and we welcome efforts to create one. These five tests will guide us toward what truly matters for our shared prosperity.
