Productivity with purpose

This week’s Economic Reform Roundtable is an opportunity to rethink productivity as a tool to build an equitable, inclusive, and sustainable society.

Opportunities for reform are not as common as they should be. Numerous events over the past quarter century have provided considerable impetus for re-evaluating our economic systems. We’ve had a global financial crisis, a pandemic, and an ongoing and urgent need to decarbonise our industries.

Yet, the fundamental principles that the economy operates on have remained largely unchallenged and unchanged. Within that context, the Centre for Policy Development welcomes the government’s focus on productivity, the five Productivity Commission inquiries and the upcoming Economic Reform Roundtable.

Our main argument is that we need productivity with purpose. If policy making is intended to serve people and planet, productivity should serve that purpose too. Pursuing economic activity purely for its own sake can risk an acceleration of the trajectory that has led us to intersecting crises: climate breakdown, inequality, high cost of living, housing shortages, environmental degradation, compounded by a loss of trust in institutions and global instability.

CPD sees the government’s focus on productivity as an opportunity to shift how we think about it, not as a narrow measure of output, but as a tool to build an equitable, inclusive, and sustainable society. The broad-based approach that the government has taken to the discussion on productivity and economic reform is encouraging. Considering quality alongside efficiency in the care sector and an interest in opening up the overall dynamism and resilience of the economy are promising inclusions.

CPD supports this approach and encourages the government to go further in examining how we should think about productivity more generally. Across the current productivity initiatives, CPD recommends that the government:

• Use the national conversation to explicitly consider the underlying purpose of growing productivity and consider how to enhance productivity in ways that improve society, the environment, and the economy.

• Take a broader approach to economic dynamism and resilience by expanding the thinking beyond deregulation and tax reform to include full employment and economic complexity.

• Advise on a package of tax reforms that seek to broaden the tax base, shifting the tax mix away from income and towards rents, wealth and consumption.

• Investigate how productivity is currently measured in the care economy, and propose productivity metrics that align with performance, quality and social value.

• Combine the emphasis on collaborative commissioning with relational contracting and long-term funding timelines – particularly for First Nations programs and services that address complex, intersecting issues.

• Expand the exploration of prevention frameworks beyond the care sector to capture structural conditions like poverty, income inequality, and housing affordability that drive demand for services and are some of the root causes of vulnerability.

• Explore frontloading investment in clean industries and expanding the Safeguard Mechanism into an effective economy-wide carbon price to have an efficient and lowest-cost clean energy transition.

• Consider streamlined approval processes and incentives for project developers to work with communities as pathways to a faster net zero transformation.

The discussions Australia will have over the coming months are an important moment in time. We need to find new ways to turbocharge the economy. But before we launch, we must chart a course to a meaningful destination.

We need productivity with purpose, which means growing productivity in a way that enhances community wellbeing, secures environmental sustainability, and provides for economic opportunity.

An extract from Productivity with purpose: clear pathways to a more equitable future – Centre for Policy Development