Report: Productivity Crisis Still Manageable As Long As Nobody Knows What Productivity Actually Is

ERROL PARKER | Editor-at-large | Contact

Australia's productivity crisis remains comfortably manageable, economists say, largely because most people are unsure what productivity means and are therefore unlikely to demand anything be done about it.

Productivity, which is simply how much value the economy produces for each hour worked, determines wages, living standards and whether growth actually reaches people. For this reason, it is rarely explained in public because it is fucked.

Instead, governments prefer to rely on substitutes. Population growth is the most effective. Immigration now functions as human spakfilla, filling cracks left by weak productivity, propping up GDP and expanding the tax base without addressing why output per worker is fucked.

Government spending plays a similar role. Programs like the NDIS, aged care and Centrelink are socially necessary and politically popular but they are labour-intensive, low-productivity and structurally inflationary. They grow the economy by hiring more people, not by making each worker more productive. The cracks are not fixed. They are staffed and that is the chief reason why is it fucked.

On the other side of the ledger, tax settings quietly discourage productivity while rewarding asset accumulation. Income from work is taxed heavily and immediately. Wealth generated through property and other assets is taxed lightly, often later, if ever. Capital gains discounts function as tax cuts for existing wealth, drawing capital into housing and speculation rather than innovation or new industries, which is why they are fucked.

The Reserve Bank has warned that this model produces weak long-term growth and stagnant living standards. This warning has been treated as reassurance that the problem is technical, gradual and unlikely to require action before the next election.

As long as productivity remains abstract, the system holds. People are added. Spending expands. Assets rise. GDP grows. Reform is deferred.

The crisis is not that productivity is falling.
It’s that nobody understanding it turns out to be extremely useful.

More to come.