Weak productivity not an abstract policy debate, says CPA

CPA Australia has warned in its submission to the Select Committee on Productivity in Australia that the nation’s prolonged productivity slump can no longer be treated as a slow-burning problem.

“Australia is running out of time. If productivity continues to stagnate, living standards will go backwards, and the economy will struggle to sustain growth,” said Gavan Ord, business and investment lead at CPA Australia.

Ord highlighted the link between weak productivity and lower wage growth and fewer opportunities for Aussie businesses and workers, and said the issue was not an abstract policy debate.

In its submission, the body said that there was no quick fix to the nation’s productivity problems, and pointed to a need for sustained, co-ordinated reform across tax, regulation, fiscal policy, and business capability.

Piecemeal reforms and short-term political thinking have failed to arrest the decline in productivity, it added.

Comprehensive tax reform

“Our tax system is increasingly complex, uncompetitive, and misaligned with where the economy is heading. Continuing to avoid meaningful tax reform is a deliberate choice to accept weaker productivity and slower growth,” Ord said.

Ord also argued that regulatory overload presented a strain to productivity.

“Governments must stop treating regulation as the default response and start proving that non‑regulatory options have been exhausted.”

“Productivity growth is driven by a strong, innovative private sector. Excessive public spending can pull capital and labour away from more productive uses and ultimately make the problem worse.”

Technology is not the silver bullet

“We cannot assume technologies like AI will magically lift productivity. Without proper support, many small businesses will be left behind, and the productivity gap will widen,” Ord said.

Instead, the body’s submissions suggested a boost in young entrepreneurship to create a more dynamic and productive economy, stressing the need for the government to make it easier for young Australians to start, grow, and acquire businesses.

The body pointed to the forthcoming productivity as an opportunity to achieve meaningful, long-term reform to deliver lasting improvements in economic performance.

Looming federal budget, decisive

Following yesterday’s (25 February) news of a 3.8 per cent year-on-year rise in the Consumer Price Index, Deloitte said that the CPI hike meant that a pre-budget rate rise remained on the table.

The big four firm said unless the federal budget outlines significant economic and tax reform, inflation would continue, and growth would stagnate.

“The May Budget needs to meet the moment and outline significant economic and tax reform,” it added.

“As living standards atrophy and as the Reserve Bank wrestles with limp supply growth, it is fiscal policy that holds the key to lifting the pace of growth and bringing inflation back to target.”