Thursday, September 11

Productivity: the forgotten answer

My letter as per below appeared in the AFR today:
In (“A golden age of living standards is now passing”, AFR September 4) Chris Richardson concludes that the biggest boom for Australia in a century and a half is continuing to ease back, to exert pressure on national income. Richardson suggests it’s time to “do the deal time” for crossbench senators to support some stalled budget measures.
But it is also true the past mining boom for Australia, although positive overall, was a catalyst for asset and wage inflation in non-mining industries, combined with a high dollar, rendered large segments of manufacturing uncompetitive.
During this period our productivity declined as we relied too heavily on a continuance of extremely favourable terms of trade, and households leveraged from housing appreciation to borrow more to sustain standards of living.
But in the aftermath we have lost sight of the potential of improved productivity to generate higher real incomes to lead to long-term improvements in the nation’s living standards, by giving prominence to investments in education, training, research, development and innovation.
What is lacking is a concerted industry programme to enhance investment in projects to improve productivity by industry segment, to enhance the nation’s ability to compete. We should not be at all perturbed in borrowing to do that, so long as we are not borrowing to fund current consumption.


Tom said...

Economics is not one of my strengths, but it seems to me that in some ways, all Australia has done these many years is to squat and asset strip. Was there not a better way to utilise the raw materials?

Lindsay Byrnes said...

Most certainly Tom - converting at least a proportion of the raw metals into products before export was always been a much better option. The big miners also lacked a disciplined approach to their expansion, buying assets at the top of the commodity cycle and in poorly allocating capital which is only now being remedied. They are also now taking an improved approach to sustainable development to ensure site restoration to previous habitat and to consult with the traditional aboriginal to ensure all employees and managers understand their culture and show respect for the land. A few , such as Andrew Forrest of Fortescue ( Twiggy ) have made a very concerted effort, to set up the Minderoo Group which is a portfolio of diverse business interests, comprising infrastructure creation, property development, medical research and an extensive sustainable mining portfolio whose aims are to be leaders in Indigenous training, employment and environmental protection. Best wishes