Productivity

Kevin Rudd is undoubtedly right that an improvement in productivity growth will lead to larger increases in income per person over time. However, his vague statement that “working families” have an interest in Australia’s productivity demonstrates that perhaps he has not put much thought into the matter. It affects them for sure, but what can they do to change it?

In basic terms, productivity is the efficiency with which inputs in production (capital, labour, raw materials) are transformed into outputs (finished goods). It is largely dependent on technological advancement. Productivity growth grew so much after the Hawke-Keating reforms due to moves towards more efficient methods of organising production and allocating resources. However, the lowest hanging apples are picked first, and we reached a higher level of productivity, not a permanently higher growth rate.

Since then, productivity has been driven largely by technology. That is something that governments (or working families for that matter) have little control over. Unless, of course, they invest more in government-funded research and development so that the gains are ongoing over time.

If Kevin Rudd is serious about improving productivity, where is the extra funding for universities, CSIRO, ANSTO, etc?

(published under a pen name in The Age, 20 January 2010).