The Melbourne Economic Forum released a renewed warning yesterday that real incomes in Australia will continue to fall without dramatic productivity increases.
It found that: “If Australians were to continue enjoying the growth in living standards to which they have become accustomed in recent years, multifactor productivity growth would need to reach almost 2 per cent per annum – a performance not achieved since the last program of major economic reform in the 1990s.”
Well that’s not going to happen.
However, there is some hope productivity growth can stay ahead of 0.5 per cent annually – the rate required to keep real incomes where they are today.
But while talk of ‘productivity’ is often framed in terms of restrictive union practices or inflexible workers, there are many other places to find the low-hanging fruit of productivity gains.
One that is often overlooked is just how long workers take to get to work, or the economic drag they create sitting in long lines of traffic congestion and thus snarling up roads that are more productively used by freight or other commercial vehicles.
And yet Australians do love their cars. They do. This columnist registers two cars and one motorcycle for his own personal use – though it’s the bike that is most often taken out to fight through the city traffic. It’s a productivity boost that also happens to make a pulse-quickening rumbling sound when I rev the engine at the lights.
The growth in Australia’s world-beating dependence on private vehicles is shown in the staggering chart below prepared by David Cosgrove, Bureau of Infrastructure, Transport and Regional Economics (BITRE). Note the rapid growth in private-vehicle use ramps up just as the first FX Holden rolled off the production line in Melbourne.
Australians gleefully abandoned trains, trams and buses to drive their own vehicles, to the extent that the almost linear growth shown below was only marginally impacted by the 1973 oil shock.
However, after the second oil shock in 1979, the world began moving to more fuel-efficient vehicles, and the proportion of journeys made by private vehicles appeared to stabilise just above 85 per cent.
Nothing stays stable for ever, of course. In the past decade there has been a shift back to public transport as sprawling Australian cities make commuting by car more expensive -- both in terms of fuel, time spent battling congestion, and skyrocketing parking costs.
A comprehensive survey of public transport data has not been released by the Australian Bureau of Statistics since 2008, though Melbourne transport commentator Chris Loader has collated disparate data sets to produce the chart below.
It shows Melbourne and Perth leading the nation in the shift back to public transport, with increases in public transport patronage of around 60 to 65 per cent in the past decade.
That doesn’t mean people like public transport, but as in other developed nations the economics of bus/tram/train vs car are becoming irresistible.
Just before the GFC, Australia’s Sir Rod Eddington was asked by Britain’s Blair government to report on the state of that nation’s transport mix, and where investment was needed to drive productivity and economic growth.
His report found, in stark contrast to Australian cities, that “89 per cent of travellers to central London in the peak (1 million each day) arrive by public transport; and only 8 per cent by car. Even then, the car accounts for 61 per cent of commuters destined for Outer London, where the public transport alternative is less viable”.
Eddington was, until recently, chairman of Infrastructure Australia, a body that recommended recently: “Australia's transport systems are especially struggling ... with public transport growing rapidly in recent years and reaching capacity limits in most major cities.
“Urban regeneration, transit oriented developments, and planning that facilitates the use of public transport, walking and cycling as viable transport options will help ensure the sustainability, livability, and productivity of Australia's cities into the future.
“We can no longer plan cities around historic trends in traffic patterns.
"Infrastructure Australia believes that, to maintain the economic success and environmental sustainability of Australia's cities, the time has come for an unprecedented commitment to the creation of world-class public transport in our cities.”
And just as that recommendation was made, the Abbott government won power promising not to invest federal funds in urban rail, but instead to put all its infrastructure spending into roads.
The funny thing about that nostalgic decision is that the number of kilometres travelled by road by the average Australian is falling, as the chart below shows.
The Greens angered many commentators recently by digging in and blocking the increase in fuel excise that the government had planned to hypothecate for road upgrades. They have a point.
But in combination, the Abbott blind-spot on public transport, and fuel remaining a couple of cents lower than it otherwise would have been thanks to the Greens, rev-heads like yours truly will continue to jam up our city roads and crimp productivity. Vrroom.