How Abbott's driving us back to the future

Lack of public transport infrastructure investment and a slightly lower fuel price are keeping Australians in their cars, and hitting productivity in the process.

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.

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