Australians are feeling the pinch in their wallets, and the culprit might surprise you: sluggish productivity growth. Recent research from the Productivity Commission has shed light on a concerning trend – Australians are missing out on an extra $25,000 in their pay packets, all due to the global slide in productivity growth since the 1990s.
Productivity, often described as the measure of how efficiently labour can produce goods and services, has taken centre stage in recent months. This economic indicator has become a political flashpoint, and for good reason. The warnings are dire – if Australia’s anaemic productivity growth is not reversed, it could lead to a further erosion in living standards for all.
Over the last decade, Australia has witnessed a worrying trend: labour productivity growth has averaged a mere 1.1 per cent a year. This rate is the slowest in 60 years, raising red flags about the nation’s economic well-being.
Newly published GDP data reveals that labour productivity, which measures the output per hours worked, has declined by 3.5 per cent over the 12 months leading up to June. This drop has brought labour productivity to its lowest point since May 2016.
According to the Commission’s report, had productivity growth matched the 1990s’ average rate of 2.2 per cent, real annual incomes in 2023 would now be nearly $134,000, which is more than $25,000 higher than the current average of approximately $107,000. Alternatively, in a scenario where productivity growth had remained at its 60-year average of 1.8 per cent, average wages in 2023 would have exceeded $118,000.
The report counters assertions made by the union movement and certain progressive factions that productivity improvements have not translated into increased wage growth for workers.
It argues that, with the exception of the mining and agriculture sectors, which collectively employ 95 per cent of the workforce, the disparity between productivity and wage has been negligible across all other industries.
The Commission observed that for over 90 percent of workers in industries beyond agriculture and mining, the connection between genuine wage growth and productivity had stayed resilient.
In the case of 95 percent of employees, the average annual wage growth trailed behind labour productivity growth by approximately 0.12 percentage points.
