It probably comes as no surprise that, for the second year running, addressing productivity challenges is one of the critical issues identified by the business community through the CEDA and Business Spectator’s Big Issues survey.
Business recognises that the windfall gains associated with the rise of Asia are coming to an end. Future prosperity and growth will be a result of concerted efforts to raise Australia’s competitiveness and productivity.
Productivity, however, is a strange beast.
If you scratch a little further behind the survey results they reveal that multi-factor productivity must be the focus, a position advocated by the Committee for Economic Development of Australia in its Economic and Political Overview 2012 publication earlier this year. But in some sections of the media there is little distinction made between multi-factor productivity and labour productivity. Labour productivity has been bubbling along at a small rate of growth and there are some indicators to suggest this is likely to continue.
The real area of concern is multi-factor productivity – essentially improving efficiency.
While the influences on multi-factor productivity are much harder to measure, the survey results show that it is the issue, particularly in relation to innovation and appropriate infrastructure, which is of most concern to the business community. In fact, productivity, innovation and infrastructure were the three key areas identified in the survey as priorities for ensuring Australia can adjust to world conditions in 2025 and for the federal government after the election next year.
Interestingly, the area of industrial relations – in previous years identified as a key productivity inhibitor in the Big Issues survey – seems to have dropped off the radar, further reinforcing the argument that multi-factor productivity needs to be the area of focus.
The difficult question is: How do we lift multi-factor productivity? The first step is to build on CEDA’s advocacy of a meaningful debate that actually delineates between labour and multi-factor productivity and drills down to specific areas that need improvement. While government has a role to play and potential areas for improvement have been identified by the Productivity Commission, the real driver of change must be the business community itself.
As I have noted previously, the commodities boom has allowed us to become somewhat complacent in sectors such as mining with respect to innovation in terms of technology and work practices. But as the boom enters a new phase and begins to slow, addressing productivity across all sectors of the economy must be a priority if we are to ensure continued prosperity in coming decades.
In addition to the clear focus on productivity, other key results from this year’s Big Issues survey included the importance attributed to the Asian Century in sustaining Australia’s prosperity. In particular the federal government’s white paper is seen as a critical roadmap to ensure our economic objectives in the Asia Pacific region can be realised.
I think few would doubt the importance of Australia capitalising on the Asian Century, but what the survey responses really show is that when a federal government puts forward a rigorous economic blueprint that has bipartisan support, the business community is prepared to acknowledge its importance.
Other results from this year’s survey revealed several surprises in respect to how far some issues appear to have dropped in importance, including the availability of skilled labour, industrial relations reform and reforming the tax regime.
These areas ranked the lowest in the nomination of issues that would help Australia adjust to changing economic conditions to 2025.
In addition, it would also seem that much of the heat has gone out of the climate change debate following the introduction of the carbon tax. Climate change as a significant influencer on Australia’s prosperity dropped well down the list of factors affecting the Australian economy to 2025 and ranked as one of the last priorities for the federal government after the election next year.
The final notable result from this year’s survey is the lack of clarity around the importance of the federal government having a budget surplus. The most popular response indicated that respondents were neutral on this issue, with the remainder split almost evenly between agreeing and disagreeing with its importance.
This would seem to indicate that for the Australian business community the importance of governments delivering budget surpluses is a political issue, not an economic one.
Professor the Hon. Stephen Martin is the chief executive of CEDA.
Research design and analysis for the Big Issues survey was conducted by CEDA, with input from Business Spectator. The sample comprised 3034 Business Spectator readers and CEDA members combined, who opted to participate in an online survey between Tuesday 13 November 2012 and Monday 26 November 2012.