Australia’s Productivity – Take 1
The latest five year discussion of the Australian economic future has just been released. The current future suggests Australia will become older, far less productive, with lower average incomes and a national debt of twice the current horrendous national debt. The australian newspaper today says 'disaster if we don't act now'. Amen to that.
This column looks at the main reasons for relatively high productivity from the 1960s to the 1990s. Then we shall present some suggestions for a serious new set of productivity reform. Below is an image of the current man whose job it is now Treasurer Josh Frydenberg.
The man needed to get serious about Australia's productivity.
Despite recent disappointment, particularly in the decades of the 2000s and 2010s, Australia in the past 60 years has benefitted from a number of important policies to increase Australian productivity. These included:
Freeing ability to mine resources, started in 1960/61 by a government facing an unexpected recession.
Cutting tariffs, started by Whitlam government as an anti-inflation policy, continued by Hawke, Howard governments.
Floating the Australian dollar in 1983, already discussed in this book.
Financial Deregulation, perhaps as elsewhere overcooked but providing a substantial positive effect on national productivity.
Partially deregulating industrial relations, started under Hawke government, continued by Howard government and reversed by the Rudd government.
Establishing a GST, with some offsetting cuts to income taxes, tried by Hewson government, implemented by Howard.
The substantial pro-competition reforms to public utilities (commercialisation, corporatisation, privatisation).
Not all of these policies produced only benefits. Cutting tariffs cost manufacturing sector jobs and capability, and the Morrison government is thinking fresh thoughts about this matter. Large scale mining upsets people of a deeply ‘green’ personality. Floating the dollar has allowed what some people regard as ‘too many imports’, further eroding manufacturing sector jobs and capability. Deregulating industrial relations upsets unions and cheers business owners, and is the most ‘political’ of policy changes. The GST/income tax switch was meant to encourage saving and discourage consumption, but national saving has not followed this pattern. (A broader GST with higher rate, say 15 %, might help cure this issue.)
My overall impression is that these changes have made Australia a more dynamic and globally interesting nation. Again there are results that some people do not like. Many more women are working and seem to enjoy it. However, some two-income households struggle in various ways, some of which creates neglect of children.