Productivity or Complacency? Graham Bradley Speech to the Australia–Israel Chamber of Commerce

On 12 October 2011 Business Council of Australia President Graham Bradley delivered a speech to the Australia–Israel Chamber of Commerce (AICC) titled ‘Productivity or Complacency: Which Path for Australia’s Future?’

An edited extract of the speech published in The Australian on that day is reproduced below.

In the two years since I took up the presidency of the Business Council of Australia the need for clear-sighted leadership on economic policy has become even more pressing.

Australia is faced with a choice between two alternative paths that will determine our economic trajectory for the next two decades or more.

One path is the path of complacency and I share the sense of many Australians that this is the path we are now on. The commodities boom has made it possible to paper over hard decisions that must ultimately be made.

Australians would feel more confident if they could see a path that would make us more resilient in the face of international headwinds through better management of the transition under way in our economy and pursuing productivity improvement as the basis of our future prosperity.

At last week’s jobs forum, the Prime Minister called for a more “sophisticated conversation” about productivity. I want to take up that challenge and dramatise the choice Australia will make, either by decision or by default, during the next year or two.

The Australian economy is blessed with sound fundamentals. Our unemployment rate remains comparatively low. Our terms of trade remain strong. Our commodities are in great demand. But we cannot afford to take these advantages for granted. A path of complacency will lead us over the next 20 years to lower growth and an inability to fund high-quality services from government.

With an ageing population and fewer workers each year supporting every retiree, we run the risk of becoming a country forever playing catch-up on social and economic infrastructure.

Unless we take steps now we risk becoming a nation that has allowed thousands of higher value-adding jobs to drift overseas and its economy to become less adaptable, less diversified and less resilient. This is the path to mediocre growth and declining opportunity.

The alternative path, paved by a comprehensive reform plan, will encourage our most competitive industries to grow by providing supportive tax and regulation environments. It will see our resources, agricultural and education services industries remain acknowledged global leaders, and our professional and financial services firms remain leaders in the region.

This path sees us developing and sustaining an economy that is underpinned by ongoing productivity growth.

When the BCA attended last week’s tax forum, we went with a compelling case for reform based on new research showing an unfolding fiscal challenge during the next four decades.

We called for a 10-year plan to overhaul the tax system and in parallel to improve the efficiency of government spending.

Our fundamental argument – broadly accepted at the forum – is that in confronting the fiscal challenge, we will need to look at spending and tax together, and understand that the economy itself will need to do the heavy lifting. The best way to equip the economy to do that is through investment. The best way to attract more investment is to broaden the tax base and lower our relatively high corporate tax rate.

The labour market is an area of particular significance and I want to dispel the myth that when business leaders talk about productivity growth what they really want is for employees to work harder, for longer hours and lower wages.

A well-functioning labour market relies on flexible and responsive education and training institutions, efficient movement of workers between sectors and regions and high-performing workplaces based on direct, mutually respectful engagement between employers and employees.

The BCA has been encouraging government to boost workforce participation for Australians who are underrepresented in the labour force.

But let’s make no mistake, this worthwhile effort is not going to fully provide Australia’s requirements for labour and skills.

We also need to be removing barriers to the mobility of skilled technical and tradespeople across state borders by progressing national occupational licensing reforms for key trades.

And we need our immigration system to facilitate the flow of skills into Australia where we don’t have enough of our own. While our first priority is to maximise the participation and productivity of local people, we still need to maintain a strong skilled migration program and provide flexibility of access to foreign labour.

Commonsense tells us that the provision of efficient infrastructure is another big ticket to lifting lagging productivity.

We need reforms that encourage and enable infrastructure development and ensure that the right projects are delivered on time and on budget, thereby reinvigorating private sector investment.

Research being undertaken for the Business Council estimates a pipeline of some $310 billion worth of major infrastructure projects either planned or currently under way in Australia.

These projects arise in a window of opportunity the commodities boom has given us and it is critical that they can be delivered quickly, efficiently and in the most cost-effective way.

We also have to change the culture in Australia about how we make regulation and commit to more rigorous cost-benefit and regulatory impact assessment processes.

Stage two of the seamless national economy reforms must be focused almost exclusively on productivity.

We have to remember the fundamentals of how a market-based economy can improve productivity and living standards.

Nothing could be plainer than this. Australia is at the point of decision where Europe was a decade ago. We need not choose the same path.

But choosing the productivity path requires a new compact between business and government to work together to build common ground with the community on the choices that need to be made.

It will be individual businesses, competing in our open marketplace, that make our economy more productive and resilient.

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