Lost in a productivity haze

Australia has a proud history of major economic reform, which has served us well until now. We must not rest on our laurels, however, as growing international uncertainty and increasing competition from developing economies threaten to make our hard won economic prosperity short-lived.

The reality is that Australia has been riding on the substantial successes of economic reform from the 1980s and '90s for too long. The last big economic reform was the introduction of the GST in 2000.

The annual CEDA/Business Spectator Big Issues Survey shows productivity and infrastructure are the major issues that will confront Australia in 2012. In fact, productivity was the number one issue survey respondents thought would determine Australia's future prosperity.

But while there has been increased noise around productivity in national debate, genuine moves to examine or address this issue have been negligible.

Under a minority government, we have witnessed a continued focus on policies that have remained unresolved over several terms of government of different political persuasions, rather than a focus on the substantive underpinnings of economic reform.

This policy housekeeping has meant that there has been little attention to the major economic policy issues confronting Australia, such as productivity. As a result, respondents to the Big Issues survey unsurprisingly rated the federal government's policy decisions as relatively ineffective.

The carbon tax is the primary example of this – a policy compromise adopted as a consequence of being part of minority government and an unresolved issue from two previous governments. The emotive issue of refugees is another. Both are important, but have seen considerable time wasted on political point scoring, leaving little capacity for robust public discussion on their implications for economic reform.

What Australia needs instead are meaningful reforms that will enhance Australia's economic flexibility and capacity. This includes reducing the regulatory burden on business, as well as providing suitable infrastructure.

Infrastructure underpins our economy's capacity to respond to external shocks such as the China resources boom, the European sovereign debt crisis and radical changes in weather patterns, such as those experienced at the beginning of this century.

Better planning from government was another key imperative identified by survey respondents for ensuring the delivery of adequate levels of infrastructure.

If we fail on this front, our cities will become clogged, our ports and rail network will be unable to deliver goods with the speed and efficiency needed and our trading partners will go elsewhere to source their goods and services.

CEDA is exploring the importance of infrastructure delivery in two major research reports: A Greater Australia, looking at issues around population, and the Australian Water Project. Final reports for both are due next year. In undertaking this research CEDA has found a major disconnect between what is needed on the ground and the political decisions being made.

It is time for both major parties to return to a bipartisan commitment on economic reform. Both parties must acknowledge the need for such reform and engage in meaningful, robust and evidence-based public debate. If not, the hard-won gains of the past will be but a fleeting memory as we are mired in political point-scoring and policy vacuums.

*The survey is based on responses from over 1100 CEDA trustees and Business Spectator readers.

The Hon. Stephen Martin is the current chief executive of the Committee for Economic Development of Australia. He was a member of the House of Representative for 18 years, in which time he was a chairman of the standing committee on banking, finance and public administration and for three years was speaker of the House.