Business concerned Treasurer failed to say ‘productivity’ in budget speech
Labor’s answer to Australia’s dwindling productivity consisted of pro-competition reforms and a streamlined, incentivised green investment package. Business sees it as a more fundamental issue.
The main question on the minds of many economists ahead of the budget night was whether the government would act to secure long-term productivity.
Ahead of the Treasurer’s budget night speech, Ai Group CEO Innes Willox told Sky News that viewers should keep an eye on how many times Jim Chalmers says the word ‘productivity,’ adding that he hoped it would be mentioned “regularly ... because that’s going to be the important driver to make our economy more competitive.”
“We’re facing a tightening labour market at the moment, we’re facing really sticky inflation, we’ve got business conditions are tough, R&D spend is at the lowest in a long time, productivity is going backwards, so this is many ways is a fork in the road budget,” said Willox.
According to a transcript of his speech published on his website, the word was not mentioned once. Neither was ‘productive’ or ‘efficient’.
Willox was quick to put out a statement chiding the “disappointing” omission.
"The test of any budget is whether it will make Australia more productive, prosperous and resilient. That the Treasurer did not mention boosting our declining productivity performance in his speech is disappointing,” he said.
In an address to the Institute of Public Accountants (IPA) on Wednesday morning, Assistant Treasurer Andrew Leigh sought to reassure the naysayers.
Not only did the budget help to overcome barriers to economic competition and market dynamism – including a merger law shake-up, cutting back on non-competes, abolishing nuisance tariffs, and the food and grocery code mandate – it also secured funding for productivity-intensive investments.
“For Labor, productivity isn’t about cutting – it’s about investing. Investing in making Australia a renewable energy superpower. Investing in housing and transport networks that make it easier to commute to work. Encouraging more private investment in skills and supply chains,” said Minister Leigh.
“We’re also investing in people, setting a target of 80 per cent of Australians having a tertiary qualification by 2050. This requires expanding opportunities for people to be the first in their family to attend university: creating more chances for people with disabilities, First Nations Australians, and people in disadvantaged communities to get a tertiary education.”
Labor’s productivity brainchild, the Future Made in Australia package, failed to win the affections of Productivity Commissioner, Danielle Wood – an indictment the Treasurer has been committed to rebuffing.
In response to claims that subsidies would be needed to fund the growth of young green technology companies, Wood told ABC Insiders the problem was: “Your infants grow up, they turn into very hungry teenagers and it’s kind of hard to turn off the tap.”
Wood also poked holes in the idea that Australia should even try to position itself in the global “race for jobs” fuelled by government subsidies.
"One view of the world is when other countries subsidise their production, we say, ‘thank you very much.’ That means lower prices for Australian consumers [and] where that relates to green products that's going to help us with our own green transition,” she said.
With the benefit of budget hindsight, Willox also took shots at the Future Made in Australia plan, albeit from the opposite angle.
"For all its hype, the Government's Future Made in Australia plans are in the immediate term relatively modest, with much of the proposed $22.7 billion spending pushed out to 2027-28,” he said.
More closely aligned to the concerns raised by the Productivity Commissioner, Willox added: “To build confidence the capital allocated through the fund needs to be temporary, transparent and measurable.”
The Business Council of Australia (BCA) also took to the internet on budget night to welcome the government’s commitment to competition, while warning that more needed to be done for productivity.
“The Federal Budget has taken some positive steps towards making Australia more globally competitive and the Business Council calls on the Government to use this momentum to go further by improving investment fundamentals to lift productivity,” said the BCA in a statement.
“Productivity is ultimately the most critical economic factor in the long-term and the only way to lift living standards and raise wages without adding to inflation.”
BCA CEO Bran Black said the government needed to focus on the “investment fundamentals” to get productivity back on track, meaning tax, planning, regulation, and industrial relations, need to be put on the table.
