Incomes will be 40 per cent lower and Australians will work two hours more a week just to maintain existing living standards if the country fails to lift its productivity performance, Treasurer Jim Chalmers will warn in address signalling more investment in education and technology.
Ahead of the release of a new 1000-page report from the Productivity Commission into the economic challenges facing the country, Chalmers will use a speech on Thursday to reveal major reforms will be needed to boost skill level of the nation’s workforce and to make the economy more dynamic.
Treasurer Jim Chalmers will reveal the Productivity Commission expects Australians will suffer a 40 per cent fall in income and work longer hours without a lift in productivity.Credit:Rhett Wyman
Every five years, the Productivity Commission is required to produce a report into areas of potential change to lift the economy’s speed limit. Its last report in 2017 made a series of recommendations, covering the federal and state governments, which the commission estimated could increase the size of the economy by $80 billion a year.
The proposals, most of which have never been acted upon, included road user charges, competition in the pharmacy sector, axing so-called “low-value health interventions” and a price on carbon emissions.
Chalmers, in an address to the Committee for the Economic Development of Australia, will reveal the latest commission report – to be released on Friday – shows productivity growth over the past decade has slumped to its lowest level in 60 years.
Productivity growth is now 22 per cent below that of the United States, with Australia slipping 10 positions to 16th in terms of growth rates.
Without a change, the commission projects future incomes will be 40 per cent lower over coming decades and the working week five per cent longer.
“Australia has a productivity problem,” Chalmers will say.
“In the medium and longer term, our successes will be determined by whether or not we can lift living standards, and that will be determined, in turn, by whether we can put the woeful productivity performance we saw during the wasted decade behind us.”
The commission has made 71 recommendations across five main policy areas, including the skill level of the workforce, the use of data and digital technology, increased competition and contestability in markets, lifting productivity in non-market parts of the economy, and by reducing carbon emissions at least cost.
Chalmers will say the non-market sector, which includes the care economy, has averaged zero productivity growth since 2000. But this sector, which takes in health, childcare and aged care, will continue to grow.
The move towards net zero carbon emissions will require billions of dollars of investment by 2050.
“These transformations will require investments in a highly skilled workforce,” he will say.
“For that, we’ll require better education and training systems that can supply the skills and labour we need.”
In a sign some of the proposals will be politically difficult, Chalmers will say that no government could or would accept all of the recommendations proposed by the commission.
Half of the recommendations will directly involve the states rather than the federal government.
Others will be at odds with the Albanese government’s position on industrial relations or the use of clean energy programs financed by taxpayers.
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