Australia's Productivity Crisis

Economic Reform Roundtable

This week’s Economic Reform Roundtable in Canberra aims to unite opposing voices on what's driving Australia's productivity decline. Thirty parties are attending, including economists, businesses, unions, the RBA, and the government.

It’s likely to kick off with controversy. Proposals like a four-day work week and higher taxes—hardly known productivity boosters—suggest the Roundtable may be doomed from the outset.

Australia’s productivity has fallen 1% this year and hasn’t improved since 2015. As a nation, we’re going backwards. Last year’s net migration was 457,560 people, yet only 54,000 private sector jobs were created. That leaves 54,000 productive roles supporting 403,560 individuals who are unemployed, studying, or employed in government-related work.

No one seems to have a clear solution, and watching where the blame lands feels like a cat chasing its tail. The RBA points to inflation, economists blame immigration, unions cite red tape, and the government accuses businesses. A ‘roundtable’ indeed—everyone can sit beside the person they're blaming and ignore whoever’s blaming them.

Four-Day Weeks and Work From Home

Ideas like a four-day week and mandatory two-day WFH policies continue to circulate. Add to that Victoria’s mandate of two days working from home, and for many, the traditional five-day office week is fast disappearing. With only two days now expected in the office, it’s not hard to imagine employees outsourcing their own roles offshore—at a fraction of the cost—and enjoying long lunches instead. Oh wait… businesses are already doing that.

This shift has serious implications for already-struggling commercial property and CBD-based businesses. Fortunately, the NDIS continues to offer plenty of job opportunities—if not necessarily productive ones.

Economists Blame Migration

With productivity going backwards, some economists have started pointing the finger at migration—and the numbers raise valid questions. During the COVID years of 2020–2021, just 4,300 people arrived in Australia, and productivity surged 4.6%—its strongest growth in a decade. From 2022 to 2024, as borders reopened and 1.3 million migrants arrived, productivity fell by… 4.6%.

The “car wash” analogy is particularly telling. Australia’s first fully automated car wash opened in 1963, but since 2010 many have been replaced by manual hand wash services in shopping centres. Investment in automation has been overtaken by the availability of cheap labour. As economist Salvatore Babones recently put it:

“Economic Reform Roundtable participants, take note. If the summit doesn’t address the impact of low-skilled temporary immigration on labour productivity, it may as well debate how many angels can dance on the head of a pin.”

Australia’s real GDP per hour worked has been among the weakest globally over the past decade. Since 2017, we’ve seen zero growth. In comparison, the EU, UK, and US recorded gains of 2.7%, 3.5%, and 10%, respectively. All have high immigration rates—suggesting migration is only part of the problem.

The RBA Crosses Its Fingers

Last week, RBA Governor Michelle Bullock downgraded the Bank’s labour productivity forecast, rattling economists and the government. It now sits at just 0.7% growth over two years—barely enough to recover what was lost last year. For 2024 through 2026, they’re forecasting annual declines of 0.1%.

Bullock has effectively thrown her hands up, noting the RBA’s job ends once inflation is under control—and then, hopefully, businesses invest. As she put it:

“All the Reserve Bank can do is make sure we have low and stable inflation, and if we have full employment, both of those things are very stable environments for businesses to think about how they might improve productivity…”

So there it is—the solution: hope.

Manufacturing and Energy Under Fire

Among the more credible arguments for declining productivity is the collapse of Australian manufacturing. Productivity measures output and value-added output, and Roy Green of UTS highlights the link between manufacturing’s decline and falling R&D and productivity:

“There is an almost exact correlation between the decline of manufacturing, the decline of business expenditure on research and development, and the decline of productivity growth—now at its lowest level in almost 60 years.”

Meanwhile, Senator Matt Canavan has proposed a “productive” counter-roundtable, blaming energy policy for much of the productivity decline. Manufacturing relies on cheap, stable energy—and where Australia once had some of the world’s lowest prices, we now have unstable, high-cost supply. Canavan argues:

“Up there at groupthink central, they're not even discussing the issue. No-one is discussing the fact energy prices are the biggest hit to our nation's productivity, the biggest hit to our nation's wealth and prosperity, is the fact we've lost control of our energy market.”

With outcomes from the Economic Reform Roundtable expected in coming months, we’ll soon learn who shouted the loudest. But as Shadow Treasurer Ted O’Brien warned, without a clear agenda it risks becoming just another “privileged talkfest.” One thing it will definitely produce—ironically—is a measurable dip in productivity.

In a climate where economic uncertainty, policy paralysis, and structural inefficiencies dominate the headlines, hard assets like gold, silver, and platinum offer a form of value that doesn’t rely on roundtables, reforms, or political will—just time-tested resilience