Positive labour market signs hide underlying issues, Deloitte warns

While Australia’s labour market appears healthy on the outside, a new report by Deloitte Access Economics has warned that poor labour productivity remains a persistent, structural challenge to long-term prosperity.

“Australian labour productivity has fallen considerably over the past three years,” Deloitte Access Economics partner and lead author, David Rumbens, said.

“Since its peak in March 2022, Australia’s labour productivity has fallen by 5.7% and labour productivity in the non-market sector now sits at a near 20-year low, underscoring why boosting productivity growth should be a top priority for government,”

Deloitte’s findings echo Productivity Commission reports which revealed that Australia’s labour productivity has stagnated over the past ten years, excluding a temporary spike during the pandemic. Without productivity growth, Australia’s living standards are set to flatline, the commission warned.

The incoming Labor government has declared that productivity, not inflation, would be the defining economic challenge of their next term of government.

In their report, Deloitte Access Economics highlighted that emerging technologies such as generative AI could pose a partial solution to Australia’s ongoing labour productivity headache.

“The use of generative artificial intelligence (GenAI) in the workplace is growing rapidly across many businesses, with potential implications for productivity,” Deloitte Human Capital Partner, Sarah Rogers said.

“The role of AI for professionals is enormous. There are large opportunities for automating or augmenting routine tasks and creating worker efficiencies across many occupations.

“This will likely redefine many professional roles in the year ahead, and organisations need to rethink work, skills, teams and jobs to capture these gains.”

GenAI could boost efficiency and free up workers’ time to spend on higher-quality tasks, potentially enhancing the desirability of certain occupations, Rogers said.

This could be especially relevant for the accounting industry, which has been gripped by a persistent talent shortage partly driven by perceptions that the accounting profession is ‘old, pale and stale,’ a view which industry leaders have sought to combat.

“We’re no longer number crunchers; we are now strategic advisors. I think if a lot of young people understood how the accounting role has evolved, then they would be a lot more interested in entering the industry,” Firm Ready founder Joanna Perry recently told the Accountants Daily Under the Hood podcast.

Many accountants (72 per cent) have expressed beliefs that AI adoption would see accountants’ roles shift from compliance to more complex advisory work, a survey by accounting management software firm Karbon found.

Accounting professionals are most excited about AI’s capacity to increase speed and efficiency (85 per cent), reduce errors (68 per cent) and automate tasks (65 per cent), the survey found.

Productivity woes aside, Deloitte Access Economics has said that the Australian economy is set to strengthen in 2025, and the labour market will see benefits from this momentum.

Unemployment has also remained well below historical averages, sitting at just 4.1 per cent according to April ABS labour force data, and wage growth has begun to recover.

“Real wage growth appears to be recovering from the recent slump. Positive news for the recently re-elected Labor government, who view maintaining wage growth as a top priority,” Rumbens said.

“The sustainable way to maintain healthy wage growth is through productivity gains – something the Treasurer has recently nominated as being central to the Labor government's second term.”