Businesses and individuals must meet productivity challenges
Governments (Federal and State), and equally importantly, business owners and operators, cannot afford to let the recently released 1000-page Productivity Commission Report gather dust on a shelf as have similar reports in the past. Australian Chamber of Commerce and Industry chief executive Andrew McKellar says if the nation maintains its current trajectory and fails to kick start productivity growth, future incomes will be 40% below what they are now and the working week about 5% longer.
Furthermore, most recent figures seen by Macks Advisory indicate Australia has slipped down 10 places behind other OEDC nations in productivity rankings in the past five decades.
To recover lost ground Australia needs fundamental tax reforms incorporating the right mix of globally competitive incentives that encourage and support local companies in superior research and development. And in sync with this, companies must heighten efficiency to encourage investment.
According to the Australian Consumer and Competition Commission (ACCC) this two-pronged thrust is the only way to increase productivity, and increased productivity is the only way Australians will be able to pay for health care, education, disability support programs they expect, and the AUKUS deal.
Additionally, the Productivity Commission says national productivity could be increased if the potential of working from home (WFH) is properly harnessed (but more on that later).
What needs to happen asap
To get Australia back on a path of strong productivity growth long term as soon as possible, the regulatory system must make it easy for businesses to establish, operate and grow in a dynamic, technology-driven economy.
A priority must be specific, fit-for-purpose regulation that is simple and outcome-focused -- as distinct from much current regulation that is complicated and prescriptive.
Impediments to dynamism must go and be replaced by incentives available to individuals and businesses that will encourage growth and investment in technology -- that, for example, reduces employees’ hours spent on unproductive paperwork, and time that’s wasted on infrastructure projects vital in speeding products to lucrative export markets.
Business Council of Australia chief executive Jennifer Westacott, says the Productivity Commission is right to target key areas for action as workforce adaptability, the need to better harness data and technology, decarbonising at least cost, building a more dynamic economy, and reforming the non-market sector to deliver better services at lower cost.
She says productivity isn’t about working harder for less money, it’s about building a more productive economy by way of government action and private investment.
The working from home factor
The Commission’s report is unequivocal in asserting that WFH has potential to increase productivity and can be good for both employers and employees if properly managed.
The foreword to the massive five-year report identifies so-called “knowledge workers” of the service sector as a source of productivity gains, many of whom went home to work during the pandemic.
Accidentally – because unforeseen COVID-19 lockdowns and other restrictions triggered it – employers came to realise that many employees were working more efficiently and productively from home where hours on the job could be undertaken more flexibly. and time wasn’t lost in commuting to and from offices.
But long-term management of WFH, especially if it’s incorporated with the hybrid requirement of specific days of office work, is obviously fraught with problems for employers – for example in trying to determine optimal capital expenditure on in-office and home equipment that yields maximum productivity gain and the healthiest possible balance sheet.
The report goes on to point out that the WFH potential to boost productivity depends on managements’ capacity to initiate broad reorganisation of work practices – an area, which it’s suggested is “wide open for innovation”.
If WFH arrangements are to function effectively with in-office systems, the Commission foresees the need to lock them in organisationally so that both employers and employees are given certainty about expenditure on required equipment and infrastructure for desired productivity gains.
It’s noted in the report that a proactive approach to this challenge by both companies and workers will likely result in increases not only to productivity but also to wages.
It’s time to reassess and reset
Clearly, for most business operators WFH was a pandemic necessity. There were no mindset changes about reorganising their workforces, but now there’s need or this.
A couple of years ago the Commission report says up to 40% of the nation’s workers were working from home regularly. It’s a lot less now, yet a lot more of them are showing interest in jobs where stable hybrid home-office arrangements apply.
Many businesses are mandating but not enforcing a required two to four days of office work a week for employees, but such edicts tend to be based on management convenience rather than assessment of whether they’ll result in productivity increases.
The Commission says now’s the time for a reset of this hybrid model for one based not on employers’ or employees’ mere preferences but on hard evidence that it will increase productivity.
For the report’s message is clear. What’s needed if we want enhanced productivity are good ideas about work to flourish alongside better skills and more investment in technology.
It’s also abundantly apparent that if once again lip service is given to a Productivity Commission report that is thereafter shelved and forgotten – as it has repeatedly for half a century -- then once more potential billions of dollars of economic benefit will be lost.
The response now required
Innes Willox, chief Executive of the Australian Industry Group (our nation’s major employer association) is calling for “a detailed and constructive response” by the Federal Government to this latest report.
“The challenges presented by the imperative to reach net-zero emissions while also striving for a sustainable uplift in living standards, are imposing.
“Yet we have little choice but to overcome the role that low productivity growth has played and continues to play in limiting our ability to meet these challenges.”
Because 36 of the Productivity Commission’s 71 recommendations involve State administrations, it’s vital Prime Minister Anthony Albanese and Treasurer Jim Chalmers produce a response to the Commission’s report that displays leadership to the States.
