Grattan on Friday: the galahs are chattering about ‘productivity’, but can Labor really get it moving?

Former prime minister Paul Keating famously used to say the resident galah in any pet shop was talking about micro-economic policy. These days, if you encounter a pet shop with a galah, she’ll be chattering about productivity.

Productivity is currently the hot topic for a conversation on economic reform. Australia, like many other countries, has a serious problem with it. Our productivity hasn’t significantly increased for more than a decade (apart from a temporary spike during the pandemic).

Now Treasurer Jim Chalmers has named productivity as his priority for Labor’s second term; assistant minister Andrew Leigh, part of the government’s economic team, has had it inserted into his title; the Productivity Commission has put out 15 potential reform areas for discussion, and Prime Minister Anthony Albanese has announced a roundtable to canvass the way ahead.

The roundtable appears to be a prime ministerial initiative. Announcing it at the National Press Club on Tuesday, Albanese made a point of saying he had asked Chalmers to convene it. Perhaps it’s a case of the prime minister emulating his forerunner Bob Hawke, with his penchant for summits, while Chalmers seeks to be a contemporary Keating, as he searches for reforms to promote.

It would be a major achievement if people were able to remember the second-term Albanese government for paving the way for a significant lift in Australia’s productivity. It would probably also be an economic and political miracle.

Let’s never knock a summit, but let’s not be taken in by the suggestion that the planned August meeting, involving employers, unions and the government, will mark some breakthrough moment. Business representatives are approaching it with a degree of cynicism; they saw the 2022 jobs and skills summit as preparing the ground for the new government to meet union demands.

This summit is expected to have fewer participants than the 2022 meeting, and may be briefer. Albanese described it as “a more streamlined dialogue than the jobs and skills summit, dealing with a more targeted set of issues”. Chalmers will announce more details next week. We can expect the government will package a collection of initiatives at least for further work, and perhaps a few for early action.

While many stakeholders give lip service to improving productivity, there are huge obstacles to actually doing so.

There’s perennial talk about tax reform – from business and economists, rather than the government. But serious change produces winners and losers, and having “losers” has become a political no-no, especially when there is not enough money to compensate them.

The housing crisis could be eased, with more homes built faster, if there were less onerous regulations, notably at state and local level. Governments are working around the edges of this, but attempting to seriously slash regulation immediately runs into opposition from those who, variously, argue that will harm city-scapes, the environment, safety or the like.

Red tape hampers big projects, but interest groups concerned about fauna, flora or the climate defend extensive hurdles and appeals processes as important for other priorities.

We’d be more productive if people with skills (whether immigrants or those moving between states) faced fewer complexities in getting their credentials recognised. But critics would point to the risk of underqualified people getting through.

Regulations are both barriers and protections. Whether you see particular regulations as negative or positive will depend where you are coming from. Less regulation can enhance productivity – but in certain cases the trade-off can be less protection and/or more risk. We have, for good or ill, become a more risk-averse community.

Employers say various industrial relations laws and regulations restrict changes that could boost productivity. A Labor government interlocked with the union movement is going to listen to its industrial base on that one. Asked on Tuesday whether his message to business groups going to the summit was, “don’t waste your breath if you’re going to raise IR” Albanese said, “People are entitled to raise whatever they want to raise. But I’m a Labor prime minister.”

Artificial Intelligence presents great opportunities to advance productivity. But it will cost some jobs and produce dislocation. Industry Minister Tim Ayres said recently, “I will be looking in particular at how we can strengthen worker voice and agency as technology is diffused into every workplace in the Australian economy. I look forward to working with our trade union movement on all of this.” Employers’ ears pricked at the union reference.

While the government is signalling it wants to do something meaningful on productivity, the prime minister is also highly cautious when it comes to getting ahead of what he considers to be the government’s electoral mandate. Nor is he one to gamble political capital.

He is not like, for example, John Howard, who before the 1996 election said he would “never ever” have a GST, then brought forward an ambitious GST package that he took to the 1998 election. That package had plenty of compensation for losers but Howard, who had a big parliamentary majority, was nearly booted out of office.

Reform is more difficult than it was in the Hawke–Keating era – though it wasn’t as easy then as is often portrayed now. The voters are less trusting of government, and less willing to accept the downsides of change.

The voices of those wanting to say “no” to various proposed changes are greatly amplified, in a highly professionalised political milieu and ubiquitous media opportunities. In the era of the “permanent campaign”, opinion polling has become so constant that politicians are always measuring their support in the moment, making a government hyper-nervous.

Progress on productivity is also harder these days because the easier things have been done, and because changes in our economy – especially the growth of the care economy – mean in some sectors efficiencies are not so readily available, or measurable.

We don’t actually need more inquiries, or a roundtable, to come up with ideas for what could or should be done on productivity. There have been multiple reports and thousands of recommendations. What is required is for the government to devise a bold program, have the will and the skill to implement it, and the ability to sell it to the public. But that runs into the problem of not having sought permission from the voters – which forces the government back to incrementalism.

Whatever the problems, it is not too fanciful to see Chalmers hanging his hat on the productivity peg in his longer-term bid to be the next Labor prime minister. We’ll see how he goes.