Manufacturing News

Productivity growth needs work from all sides

The renewed debate over the need to boost Australia’s productivity growth rate is an important one, especially as we confront the realities of our ageing society.

It will be a test of the maturity of the political debate in Australia as to whether we can make genuine progress.

Economic growth is made up of productivity growth and growth in the workforce. Australia must focus on both if we’re going to meet the challenges ahead.

In our submission to the 2020 Summit convened by the newly elected Rudd Government in early 2008, Ai Group proposed raising Australia’s rate of potential annual GDP growth from just under 3% to 4.25% by 2020. This would require boosting productivity and lifting the pace of labour force growth.

Ai Group advocated the following measures to achieve nearly 1% in extra productivity by 2017:

A greater allocation of resources to a revamped education and training system;

Better co-ordination and an increased level of investment in transport, water, energy and broadband infrastructure;

Lifting the pace of innovation and raising our innovative and business capabilities;

Smarter, less onerous and better harmonised regulatory arrangements including in the areas of workplace relations; occupational health and safety and environmental regulation;

More efficient and competitive national markets especially in the critical areas of energy and water;

High-performance provision of government services; and

More streamlined and efficient tax systems.

In addition to improving productivity we also need to add to the size of our workforce. This is the other side of the growth equation.

Ai Group has estimated that the following measures could add 0.40% to labour force growth by 2017:

Increasing the rate of net immigration, including of temporary migration;

Lifting education and skill levels both at the point of workforce entry and among the existing workforce;

Creating better opportunities for workforce participation including among parents; indigenous Australians; non-English speaking people; mature aged workers and people with disabilities;

Flexibility and adaptability of workplace arrangements and management practices;

Greater attention to preventive health and improved rates of return to work after injury and illness;

A focused effort on the education of young people at risk of failing to attain adequate qualifications; and

Ongoing attention to removing disincentives to and facilitating transitions from welfare to work.

Many of these reforms, particularly in the area of labour force growth, are on track.

However, some employers have reservations with a number of initiatives such as the new right to request more flexible working arrangements for mothers returning to the workplace and the government-funded paid maternity leave to be introduced next year. These will need to be properly handled so as not to impose undue costs on employers and with the clear objective of improving workforce participation.

We also need ways to encourage older workers to continue contributing their expertise. In general, we need to keep the focus on flexible labour markets. It’s an old mantra of employers that has been shown to be extremely effective in the past.

Clearly there is a broad range of issues involved, and there is a role for Government to forge these efforts and to join up the dots in an effort to improve the national bottom line.

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