How can we sustain productivity growth into the future?
Digital disruption is changing the face of Australian economy, while bureaucracy and red tape restrict the public and private sector. Ahead of the GAP Jobs Summit, Kathryn Matthews, Partner at Deloitte Access Economics, explains what needs to be done to boost productivity into the future.
It has been nearly a quarter of a century since Australia last had a recession. In this time Australian workers have enjoyed broad-based wage growth and rising prosperity. However, our nation faces a number of challenges over the next decade if we wish to maintain our steady economic growth. The participation rate is set to fall as the baby boomers begin to retire, and the easing of the global mining boom will lower our terms of trade. We will need to see growing discussion on how we can sustain productivity growth into the future through smart business and government policy.
Globally, the next decade will see the continued rise of Asia. The largest growth will be in tourism, agribusiness, gas, international education and wealth management (Deloitte, Positioning for Prosperity report). For now, these industries make up a relatively small proportion of Australia’s economy. However, many of these industries are areas of Australian strength, and we are well positioned to capture this next wave of prosperity.
Beyond better skill matching, what can Australia do to its boost productivity? 65% of Australia’s economy faces the possibility of major disruption from digital innovation (Deloitte, Digital Disruption report). Big changes are already happening in the retail, media, finance and professional services industries. And the education, health and transport industries can expect similar disruption too. Australian businesses and workers which successfully harness this boom in digital technology will be pivotal drivers of Australia’s growth into the future.
Another key area in increasing productivity is cutting red tape. Bureaucracy and red tape is often associated with the public sector, but the private sector has, in the name of risk management, spent the past decades self-imposing needlessly restrictive rules and regulations. New technology has decreased companies’ need for back-office workers, but this potential productivity saving has been offset by rising employment of compliance workers. Since 1996 we have seen an approximately 4 percentage point decrease in back office workers and a corresponding 4 percentage point increase in compliance workers (Deloitte, Get Out of Your Own Way report). While mitigating risk is a noble goal, too often the cost of doing so is disproportionate to the potential benefits. A more balanced approach to risk has the potential to unlock significant productivity gains in Australia.
In terms of where future workers will come from, a broader view that needs to be taken by both government and business. We need to adopt practical mechanisms where we can make collaboration between government, industry and education happen more consistently to ensure that the changing demands of industry are well understood. It is imperative to skill our people for the emerging jobs of the future, but we also need to embrace diverse participation in the workforce. We also need to embrace a mindset of life time learning – the jobs of the future are likely to be something that we haven’t even thought of yet.
Kathryn Matthews is a Partner at Deloitte Access Economics and has extensive experience in economic policy analysis and strategy development across a range of sectors. She has worked in the private sector, academia and government including the Reserve Bank of Australia, Macquarie University, Ernst & Young, Jones Lang LaSalle and the NSW Government.
