Productivity has emerged as probably the totemic issue of the Australian economy in recent years. Many in business, academia, politics and the media believe that the country has fallen behind competitors, that our workers are high cost and unproductive and that our industrial relations laws prevent business from fixing that. We need to fix productivity, they say, or our recent rise in living standards will come to a halt.
Some of us have taken issue with some or all of these arguments, arguing that productivity has been better than believed, or that our performance in the 1990s and 2000s was poorer than we thought, or that the reasons for poor productivity growth are one-offs, such as the huge mining investment boom, and that it will recover as mining production ramps up as a consequence of new investment. Moreover, one area of productivity has been improving. The national accounts for the March quarter showed that productivity (GDP per hour worked) rose 2.1% in the 12 months to March, and gross value added (another measure) was up a solid 2.4%. Both were much stronger than the figures for the 2013 calendar year of 1.7% and 1.8% respectively. A policymaker who has previously argued for the importance of productivity growth, Reserve Bank governor Glenn Stevens, acknowledged the recent rebound in his big speech in Hobart at the start of this month.