The good news Labor won't share

In key areas of the Australian economy, productivity is improving – so why doesn't Labor properly refute the charge that 'Fair Work killed productivity'?

A Victorian ALP stalwart told me yesterday that federal Labor was "miles ahead on policy, but hopeless politicians". The latter part of that statement becomes more obvious by the day.

But let's not overlook the first part of that statement. As Alan Kohler pointed out yesterday, the Gillard government is about to tear itself apart, despite the fact that it is managing the economy extremely well.

Kohler wrote: "...unemployment is low, the currency is strong, interest rates are coming down, national savings are bulging, economic growth is solid and there’s a mining boom on" (Debt's pall over the Lucky Country, February 15).

To that list I would add the fact that net public debt will peak within months and then start to fall if Labor produces a budget surplus, as it daily promises to do. At this stage Labor's aggressive fiscal consolidation looks to be on track, meaning that a net public debt peaking at around 7.5 per cent of GDP (that figure does not include state and local government debts) is another way in which our economy is outperforming most of the world.

All of this only serves to highlight that it's a communications war Labor is losing, not individual policy battles.

This was driven home by a Labor MP in Canberra last week. I asked him if he realised Australian productivity aggregates were being dragged down by the mining sector, and that elsewhere in the economy productivity growth has been pretty steady for two decades (The dark side of productivity reform, September 1, 2011).

In the context of the current Fair Work review, this kind of information is political dynamite – and the MP in question nearly jumped out of his chair. But if a Labor MP had not heard this story, what chance is there that voters would know about it?

It has become an orthodoxy of national debate that Australia has 'dropped the ball' on productivity, and the Coalition routinely points to low national productivity growth under the Rudd and Gillard governments as a reason to remove Labor from the Treasury benches – and though it is terrified of saying it openly, a reason to tear up the Fair Work Act.

However the real story – the one that workplace relations minister Bill Shorten should be shouting from rooftops – is that with productivity taking a nosedive in the resources sector, national productivity growth can only hover in the zero to 1 per cent range as it did in the years 2004 to 2008 (see charts below) if other sectors are showing steady progress.

That's not to say there isn't headroom for improvement – the US produces roughly 25 per cent more GDP per hour worked (in 2010 US dollar terms), though Germans only produce around 7 per cent more per hour worked.

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