Access to capital for more risky firms, especially start-ups with little business history, is likely to be more restricted and more expensive, according to Reserve Bank of Australia deputy governor Philip Lowe.
This is likely to hamper Australia's productivity growth and reduce innovation. Lowe was speaking at The Sydney Institute yesterday.
"If we are to improve efficiency and advance technology then innovation is required and innovation requires someone to take a risk – the risk of trying a different process, the risk of changing workplace organisation and management practices, or the risk of spending scarce resources to explore a new idea," said Lowe.
A recent report by Bill Harley found that workplace deregulation alone won't boost productivity. Harley believes the time has come for policy makers to shift their attention from reforming the system of workplace relations towards interventions aimed at stimulating innovation.
However, a report by Ernst & Young last year, found that manufacturing is one of the most productive industry sectors in Australia.
"Older workers do have considerable accumulated experience that can boost their productivity," says Lowe. However, the available data both in Australia and the United States suggest that individuals in their 30s and 40s have a higher probability of becoming an entrepreneur than do older individuals.
"The take-up rate for new technologies is also higher for younger workers," adds Lowe. In addition, younger people tend to be less risk averse than older people in their financial decisions.
"All else constant, this higher risk aversion of older citizens means that as the population ages, access to capital for more risky firms, especially start-ups with little business history, is likely to be more restricted and more expensive," notes Lowe.
There are also factors working in the other direction. As the workforce ages, the incentive to find new labour-saving techniques is likely to increase.