(Image: Mitchell Squire/Private Media)
(Image: Mitchell Squire/Private Media)

The most important part of the Productivity Commission's interim 5-year Productivity Inquiry: Key to Prosperity report isn't its argument that only a productivity rise will deliver higher wages. And it's certainly not the claim -- risibly championed by The Australian Financial Review's John Kehoe -- that wage stagnation doesn't exist because you can buy a better iPhone with your falling real wages.

It's to be found on the bottom of page 15 where the PC, reluctantly, admits "what determines who -- business owners, workers or consumers -- get the benefits from productivity growth over time is complex ... with respect to wages, at least in the near term, factors such as the relative bargaining power between business owners and employees, and the institutional and regulatory settings that govern these interactions, are important. The extent to which the gains from productivity growth are passed on to consumers (through lower prices) is a function of market structures, both in input and output markets."

The PC's heart isn't really in it, but at least it has raised a core point that should undercut the government's insistence that if only we get productivity moving then wages will grow. Labor, of all people, should really know better. Because over the past decade, productivity growth has way outstripped wages growth -- meaning employers have taken nearly all the benefits of greater productivity.