Australians are being warned to prepare for trade-offs in areas such as housing if the nation’s productivity push is to be successful.
Productivity Commission chair Danielle Wood is calling on Australia to adopt a “growth mindset” to prioritise economic outcomes and boost living standards.
That means changing corporate taxes to promote investment, simplifying regulations, speeding up housing and energy approvals and ensuring AI adoption is not undermined by unnecessary regulation, among other suggestions.
It comes as the commission prepares to release a series of reports detailing how Australia can get productivity moving again.
“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,” Ms Wood said.
“Productivity growth is essential to fulfilling that promise.”
But productivity growth has plummeted in recent years.
How much Australia produces with the same amount of workers has grown at just under 0.4 per cent per year since 2015, compared with the 60-year average of 1.6 per cent.
That’s been caused in part by governments ignoring or minimising economic growth when making policy choices in recent years, according to a paper released by the commission.
Policymakers have made it harder that it should be to start a business or build essential infrastructure such as housing or renewable energy because they have failed to weigh trade-offs effectively, been too risk-averse or “overly influenced by vocal stakeholder groups”.
Governments must balance competing objectives and make choices that improve Australians’ overall wellbeing, even if those decisions might negatively affect other goals.
“Bringing a growth mindset to policy decisions means elevating economic growth and its benefits,” Ms Wood said.
“That doesn’t mean policymakers should ignore other objectives, but it does mean being clear-eyed about the trade-offs.”
The paper lays the groundwork for five forthcoming reports the commission is preparing to release before an economic roundtable convened by Treasurer Jim Chalmers.
He said the report made clear the productivity problem had been around for decades and almost every comparable country had the same challenge.
“The best way to strengthen our economy and make it more productive is to work through the issues in a methodical and considered way in collaboration with business, unions and the broader community,” Dr Chalmers said.
In its submission to the roundtable, a joint group of industry associations including the Business Council of Australia and the Australian Chamber of Commerce and Industry outlined four priority areas for reform.
They include reforming research and development funding models to boost innovation; cutting the regulatory burden by 25 per cent by 2030; co-ordinating and unifying planning processes to speed up project approvals; and committing to comprehensive tax reform.
“We need to cut unhelpful red tape, streamline planning, fix the tax system and improve incentives for investment,” Business Council chief executive Bran Black said.
“These policies can deliver benefits for economic activity across the whole country and importantly ensure future generations aren’t worse off.”
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