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Australians must foster a ‘growth mindset’ to earn more, says Productivity Commission

Economy
28 July 2025

The Productivity Commission has called on Australians to adopt a “growth mindset” to boost productivity, which could see workers earning $14,000 more annually.

Ahead of the release of its productivity inquiries, the Productivity Commission (PC) has reiterated the importance of boosting economic efficiency in upholding living standards over the long term.

"Australia should be a place where children born today can expect to live better and more prosperous lives than the generations who have come before them. Productivity growth is essential to fulfilling that promise," commission chair Danielle Wood said.

“‘If we could boost growth from its current level to its historic average, adult Australian full-time workers would be at least $14,000 a year better off by 2035.”

 
 

Over the long run, economists said productivity growth is linked to wage growth, as it enables the average worker to produce greater value over time.

“Productivity is how people can get real wage rises,” RBA governor Michele Bullock told journalists in April.

“If productivity didn’t pick up, then that means that the rate of nominal wage growth that can be sustained and be in line with the inflation target is lower.”

The Productivity Commission added that productivity growth had been essential to the evolution of Australians’ living standards.

“It’s the reason life today looks so different from life in the ‘60s and ‘70s. Since that time our material living standards have increased threefold,” Wood said.

“Simple things, like buying a loaf of bread, going to the movies, and even flying from Melbourne to Sydney have gotten much cheaper. We’re healthier, safer, and fewer of us live in poverty."

However, the PC has warned that productivity growth has grown by less than a quarter of its 60-year average, threatening living standards over the long run.

Westpac estimated that productivity stagnation could cost the average Australian $75,000 in income over the next decade.

It warned that productivity growth would become increasingly important to Australia’s prosperity in the coming decades as commodity prices fall, mining investment stalls, and labour utilisation hits its ceiling.

Over the coming weeks, the Productivity Commission is due to release reports on its five productivity inquiries that seek to solve Australia’s ongoing productivity issues. They are due to come out ahead of the government’s economic reform roundtable.

The first, due for release next Thursday, is set to explore how the government could boost business investment and foster more dynamism and resilience across the Australian economy.

“Governments don’t hold all the cards when it comes to boosting productivity, but their policy choices can make a real difference,” Wood said.

“Almost everything government does – taxing, regulating, delivering services – affects the pace and direction of economic growth.”