Lifting productivity could be costly for industry

Recent speeches on productivity by Kevin Rudd sound encouraging, but be warned, many of his advisors are no fans of the manufacturing industry.

As most readers would have noticed, our Prime Minister started 2010 highlighting the need for Australia to lift its productivity rate. An admiral goal and a worthy cause, however it might not be all good news for manufacturers.

While Australians are working hard, our productivity has slumped to around 1.4% in recent years, well below the OECD average. The problem for Rudd is that boosting productivity is easier to say than to do, and could involve some difficult decisions.

Using Treasury figures, Rudd says there will only be 2.7 working-age Australians for every person aged 65 or more by 2050. At the moment there are about five working-age Australians for each citizen over 65. Four decades ago there were 7.5.

Meaning less tax payers to pay for ever increasing health costs and pensions.

One option that Rudd seems to favour is growing our population through increased immigration, plus keeping older workers in the workforce for longer. However more difficult decisions need to be made.

True the government is planning to spend $36bn on road, rail and port infrastructure improvement, and increased investment in education and training, however these will only increase productivity in the long term if the government gets the best bang for the taxpayers buck.

Government’s recent administration record is not that flash. With last year’s stimulus package payments being sent out to deceased Australians and those living overseas, it does not fill me with any confidence.

It’s a similar story with the present solar power and insulation programs; woeful administration. The problem for manufacturers is that Treasury and the Productivity Commission, which the government relies heavily on for advice, are no supporters of our industry.

Reading the Productivity Commission’s chairman’s, Gary Banks, presentation at the 2009 Economic and Social Outlook Conference last November, it is clear our industry is not on his Christmas card mailing list.

Banks suggests Government procurement policies, which promote the use of locally made goods, should be discouraged.

He goes on to rubbish the federal government’s industry assistance initiatives highlighting the ASCIS and the Green Car Fund in particular describing them as ‘unnecessary’.

The housing insulation ‘pink batts’ program also came under fire and any assistance to industry affected by Rudd’s proposed CPRS were described as ‘excessive’ and poor ‘crisis policy’.

There has also been no mention to date of workplace productivity and a flexible labour market, critical areas to lift productivity.

Rudd has promised much with the new Fair Work Scheme, however the reality is as long as the union movement is involved in enterprise agreements, productivity goes out the window, despite his rhetoric to the contrary.

Other government news

While industry minister, Senator Kim Carr, is doing some excellent work ensuring we have a vibrant car industry in Australia, a decision expected soon looks set to put the final nail in Ford’s engine plant and put in some doubt Toyota’s engine plant.

Transport Minister Anthony Albanese is proposing new stiffer regulations to cut tailpipe emissions from all new vehicles by adopting Euro 5 rules (starting in 2012) and Euro 6 (beginning 2016). The standards have already been adopted by the EU.

The draft-regulation impact statement Albanese released in January lays out the costs and benefits of Australia following suit. While the draft RIS recommends their adoption, the car industry has till this month to respond, but I understand it’s a done deal.

However, there has been some positive news coming out of Canberra.

From January 1, tenderers for Australian Government work now have to demonstrate how they’ll give SMEs a fair go when bidding for major Government contracts.

All new contracts over $20m put out to tender will now require the inclusion of an approved Australian Industry Participation (AIP) Plan with any bid – setting out how suppliers will give SMEs full, fair and reasonable opportunity to supply goods and services.

Earlier this year, Carr also announced that Commercialisation Australia is now accepting applications for its $196m radical new support initiative for home-grown innovation.

The merit-based, competitive assistance program, will assist researchers, entrepreneurs and innovative firms to commercialise their ideas, with grants up to $2m to develop a new product, process or service to the stage where it can be taken to market.

For more information go to or call 13 22 56.