Productivity puzzle: treasurer eyes steps to break bind

June 5, 2025 03:30 | News

Treasurer Jim Chalmers has flagged further measures to boost Australia’s attractiveness for investors, as he contemplates a solution to the nation’s productivity puzzle.

Labour productivity – how much a worker produces in a given amount of time – fell one per cent in the year to March, national accounts figures released by the Australian Bureau of Statistics showed on Wednesday.

Dr Chalmers has identified fixing this as his primary priority in this term of government because in the long run, it’s the main driver of improving living standards.

Wednesday’s data release underscores the urgency.

Workers and shoppers in Sydney's CBD
GDP per capita, often used as a common measure of living standards, went backwards again. (Dean Lewins/AAP PHOTOS)

Although the economy grew 0.2 per cent in the first three months of 2025, GDP per capita – a common measure of living standards – fell for the eighth quarter out of the past nine.

Also buried in the data was evidence of the reason behind it.

Private investment in machinery and equipment fell 3.7 per cent over the last year.

More machinery and equipment per worker, also known as capital deepening, is one of the main contributors to productivity growth.

Treasurer Jim Chalmers
Treasurer Jim Chalmers remained upbeat about Australia’s human capital and political stability. (Lukas Coch/AAP PHOTOS)

“My focus, including today, is how do we get that capital deepening that we want to see to make our economy more productive,” Dr Chalmers said on Wednesday.

“Foreign investment from trusted sources has a really important role to play there.”

It’s not all bad news.

Australia has great human capital, political stability and deep renewable energy resources to leverage, he said.

“There is a big global scramble for capital, and we will be a very competitive part of that.”

But tax and regulatory settings were holding back innovation and foreign investment in Australia, said EY chief economist Cherelle Murphy.

Iron ore mining in the Pilbara region of West Australia
Business investment as a proportion of GDP has almost halved since Australia’s mining boom. (Alan Porritt/AAP PHOTOS)

Business investment as a proportion of GDP has almost halved since the mining boom of the early 2010s.

“It is a warning sign that changed policy conditions are needed to boost the economy’s capacity and ability to cope with new challenges,” Ms Murphy said.

Dr Chalmers said he was receiving positive feedback about work already underway to simplify and streamline foreign investment applications.

“But we are prepared to contemplate next additional steps when it comes to attracting investment,” he said.

That work might include untangling the thickets of red tape that get in the way of approvals for much-needed projects, like housing and clean energy generation, as Assistant Minister for Productivity Andrew Leigh urged in a speech earlier in the week.

Dr Chalmers said this “abundance agenda”, based on a book by US journalists Ezra Klein and Derek Thompson, had become very influential in the thinking of his economic team.

“If we want good things to happen in our economy, we need to make it easier for those good things to happen, faster, more efficiently,” he said.

“We’re not making the most of these deep available pools of domestic and national capital.

“If we do a better job of making the most of that, we will make our economy more productive over time, not overnight, but over time.”

But advocates for productivity-boosting tax reform shouldn’t hold their breath.

Staunch resistance to the government’s proposed changes to superannuation tax concessions for wealthy account-holders showed the challenges of implementing major reform, Dr Chalmers said.

“It doesn’t augur well for bigger, broader tax reform, when such a modest and methodical change is being resisted in some quarters.”

AAP News

Australian Associated Press is the beating heart of Australian news. AAP is Australia’s only independent national newswire and has been delivering accurate, reliable and fast news content to the media industry, government and corporate sector for 85 years. We keep Australia informed.

Latest stories from our writers

Don't pay so you can read it. Pay so everyone can!

Don't pay so you can read it.
Pay so everyone can!

Pin It on Pinterest

Share This