Mr HAMILTON (Groom) (17:44): What a fantastic contribution to end on productivity, a point that I will take further. I am going to make the obvious observation and repeat what has been said. The incursion of conflict into a conversation on productivity is something that is detrimental to all Australians across the workforce and all Australians full stop. How we do what we need to do, how we get together and produce what we need to produce, relies upon a conversation between employees and employers. In speaking on this appropriation bill, the context the last budget was delivered in, with the IR changes since and the regulatory framework we’ve seen—and I want to speak to a lot of these things—has led to the growth of this conflict again. I think it is something that is well worth us raising.
I want to address what is clearly becoming the biggest issue in the Australian economy, which is: how do we improve productivity levels? It is often pointed out that over about 20 years we have seen a downturn in productivity in Australia and in other Western countries as well, but there is nothing that compares to the significant downturn we have seen over the last 18-odd months, where productivity in Australia fell through the floor and was at a level we had never recorded before. We have never seen this level of productivity drop. It’s important that we address this.
I think the Australian people rightly recognise real wages as an important issue. This government ran on the agenda of raising real wages. But, as has been pointed out repeatedly and was again by the RBA in presenting to the economics committee just last week, productivity is crucial to real wages growth. There are historical links between them. For generations we have seen the labour movement acknowledge the need for productivity. We have seen employers acknowledge the need for productivity improvements as a means of increasing real wages. I always point to: what does ‘good’ look like? I point back again to the Howard era, 1996 to 2007, when real wages grew by 21.5 per cent in a time when we saw high levels of productivity. There is no surprise that those two things went together. We need to look at the policy settings that were deployed during that time to understand how we got those results.
There are a lot of things that can impact on productivity. We just heard the RBA governor talk on some of these—skills, investment, taxation policy and IR. All of these things have an impact on productivity. But my biggest concern has been and remains that, unless those policy levers are used, the default for driving productivity is going to be unemployment. That is a significant concern for all of us when in an economic situation like we are.
I want to address some of these areas. The hope amongst economists is that, having had this catastrophic fall in productivity in Australia, we can normalise and rebound. When the RBA suggested that, they admitted they were being very, very optimistic that productivity would normalise and come back. When pressed on what was in their modelling that would drive productivity, they admitted that assumptions around skills and business investment were unlikely to play any key role in driving productivity in the short term. In fact, while they may have long-term impacts, there is no significant change in the skills and investment policy settings that we see today to previous, so they don’t expect that to be any significant driver in that normalisation process. If we go back and we look at that, what are some of the things that have changed during this term of government? What is the new norm? If we are able to normalise, what will that new norm look like? I think we can see that each one of these is a downward pressure or at best a neutral situation.
We talk about business investment in new technology. One of the policy settings that the previous government deployed with great success when it came to driving productivity was the instant asset write-off. When we talk about technology, we need to see that not all technology is made by Apple or exists in the cloud. Sometimes it’s a coffee machine that uses less water or heats up faster. Sometimes it’s a tractor that doesn’t stop as often as my uncle’s does. Sometimes it’s a small improvement, and the investment in that by small business has a cumulative impact. You’re not looking at revolutionary steps forward in productivity; you’re looking at small gains that could be made from one-off investments. So, facing the realisation that productivity had fallen off a cliff, as we saw last year, the coalition called on the government to restore tax relief for small businesses and boost productivity by extending the instant asset write-off and to extend the value of assets eligible to $30,000. Sadly, the government didn’t take up these measures. This was a policy setting that has been deployed well. It has been acknowledged everywhere as a productivity driver, but the government hasn’t chosen to take that up. I hope they will look at that again because, without that investment and without that incentive to invest, we’re leaving that lever alone.
If we speak about skills, one of the saddest pieces of information we saw come out last week was that the number of people in apprenticeships and traineeships is 50,000 fewer than during the Morrison government. That could be responsive to drivers of the day. What’s important to point out is that, even if we take that as a normalisation pressure itself, it’s still fewer skilled people entering the workforce. It reinforces the conversation with the RBA. Skills are unlikely to be a driver of productivity in the short term and, certainly, in the medium term. It may well come again in the long term, if that number can be turned around, but it’s not there for us at the moment.
With regard to technology, I’ll refer to an article in the Australian by Patrick Commins:
An adviser to the Fair Work Commission says the next generation of Australians may not be better off than their parents because of “abysmally low” productivity, and the Albanese government’s industrial relations reforms threaten unforeseen consequences with little … pay-off for the vast bulk of workers.
In terms of the future that we’re seeing created for us and the threats to productivity, the important point is that they’re not just threats to us now. If we are unable to address productivity now and turn that number around, the impact is not just going to be felt by us now but by future generations. What it condemns us to is continued lower real wage growth, which is what we have seen. Real wages have not been growing.
Further into the article is where we get a feel for economists’ views on the current policy settings with regard to productivity. The article says:
With little obvious appetite for meaningful reform in areas such as taxation, and with workplace changes promising a less flexible workplace … coming generations may no longer be better off than the ones that preceded them.
If we look at the IR legislation that has come through, across the board, there is nowhere in that suite of legislation where we can point to something that has a genuine upward pressure on productivity. In fact, as has been pointed out repeatedly, the expectation is that the IR reforms that have come through do very little to increase productivity and will drive them lower. An article in the AFR says, ‘In both tax and IR, poor process and playing politics has produced bad policy outcomes.’ In the IR space, unfortunately, we’ve seen from this government steps that are quite regressive in terms of the workforce situation it’s trying to apply. There is no doubt that IR reform is an important part of a Labor or a coalition government’s agenda, but, when the policy settings are driving productivity down in a period like this, they will have long-term impacts. My genuine concern is that we have missed the opportunity to drive skills investment and to address tax reform. The clear link established in the 2008 OECD report is that high tax at a corporate level and on income tax has a negative pressure on productivity. So, when we don’t address tax reform in a meaningful way, and when we have IR legislation that goes negative, the only pathway to recovering productivity left to us is unemployment.
I refer to another view, that of Innes Willox in the AFR:
Australian chief executives are looking to the year ahead more anxious and uncertain about the national economy than they have felt for more than a decade.
The government often talks about a wasted decade. It would appear that businesses viewed the last decade quite differently. The quote continues:
This focus on productivity-enhancing measures ranks far ahead of expected funding of capital expenditure and research and development.
Businesses note that they need to find productivity. But the concern is that, the more we invest in technology, the worse off the employment trajectory will be. What we’re talking about in technology for some of these big tech corporations is AI. We’re talking about replacing the workforce. This is not beneficial for employment figures.
I can’t help but be drawn to this point that, without a clear plan to address productivity with anything other than rising unemployment, the future gets bleaker and bleaker. It’s a question of who the future gets bleaker for, because largely what we’re talking about is entry-level workers in the workforce. They’re likely to be lower paid and likely to be lower educated. We’ve already seen a shrinking manufacturing sector for decades, and now further pressures on these jobs means that the prospects are very grim.
We’re a country that has relied upon social mobility. We rely upon that not just for those going through school but afterwards, and that requires jobs for people who work with their hands outside of air-conditioned offices. That means people who didn’t get qualifications while young but still have the willingness to work hard and push ahead. Pressures on their employment levels in a situation like this are incredibly difficult, particularly for regional communities like mine, that simply have a different spread of workforce than you will see in city electorates. In Groom we are heavily reliant on mining, manufacturing and transport. We’re a place that does all the work that leaves you with dirt underneath your fingernails and calluses on your hands. These are exactly the jobs that are being put at risk when you put the wrong policy settings in place.
Without a key focus, without a policy direction that addresses productivity, the Australian people are being left in the lurch. There is little hope on the horizon that we see from the government, with its continued drive towards regressive IR legislation that puts the Fair Work Commission between the employer and the employee. I think that’s probably one of the hardest pills to swallow. We’ve come to accept that enterprise bargaining was a vehicle whereby agreements could be made between employers and those in the workplace directly, but under this government we have seen continued moves to push the Fair Work Commission between those two groups. As we’ve seen in the Productivity Commission report, when you move away from individual contracts, you drive lower productivity.
Of all the challenges this government faces, none are greater than returning our productivity to prepandemic levels. Unfortunately, where we stand today is that, even if we are, as the RBA governor optimistically puts, capable of normalising productivity levels, the new norm with the policy settings that we now see in place is lower than what the norm was previously—be it in skills, where we see fewer apprenticeships and traineeships; or be it in investment, where we see lower investment in new technologies. We see taxation policy and IR reform that depowers individuals. The forecast for productivity growth is grim.
