Interim Report 1

Released 03 / 08 / 2022

Productivity growth is about harnessing our ingenuity to do more with the resources we already have — working smarter, not harder — and investing in the latest technology and the best ideas.

The Productivity Inquiry focuses on the enablers of productivity growth in a modern, market-based, service-oriented world. This first report provides the broad productivity context for the exploration of productivity-enhancing reforms detailed in a series of forthcoming interim reports.

You were invited to examine the interim report and to make written submissions by 21 October 2022.

Please note: This interim report is for research purposes only. For final outcomes of this inquiry refer to the inquiry report.

Download the interim report

Productivity: The key to prosperity

Productivity growth, based on the spread of new, useful ideas, is the key to Australia’s continued prosperity. But the future pattern of innovation and growth could look different from that of the 20^th century, according to a report by the Productivity Commission, setting out the context of its current 5-year Productivity Inquiry.

“Productivity growth is essential to address the nation’s economic challenges, including rising cost of living pressures, but it is not guaranteed,” Productivity Commission Chair Michael Brennan said.

Releasing the first interim report as part of its latest 5-year Productivity Inquiry, the Commission warns that Australia’s productivity growth (along with that of its global peers) has slowed in the last two decades and is now increasing at its lowest rate in 60 years.

Improving Australia’s productivity performance requires overcoming specific challenges. Some are global: the need to decarbonise the economy is one, as is heightened geopolitical tensions and supply chain disruptions that hinder trade and investment flows. Arguably the biggest challenge lies in the large and growing services sector — ironically so, given an expanding services sector is correlated with rising prosperity — where historically, productivity growth has been relatively hard to achieve.

“In 2022, ninety percent of Australian workers are employed in the services sector. This has a significant impact on how we think about productivity. We have to look for new opportunities to drive productivity growth, including reviewing our policy levers and the industries where we concentrate our efforts.”

“Nowadays, improvements in service quality and the impact innovative new products and services have on people’s lives matter most. However, the overarching principle of productivity — that we aim to work smarter, not harder or longer — is as important as ever,” Mr Brennan said.

The Commission has identified four areas of policy focus that best reflect the challenges and opportunities Australia faces and will shortly release interim reports on each of the productivity ‘enablers’ for public consultation. The key enablers of focus are: innovation and diffusion of new processes and ideas; data, digital technology and cyber security; a productivity-friendly business environment; and a skilled and educated workforce.

“These enablers are relevant to our current context — the rising services sector, the challenge of decarbonisation and continued openness to the best the world can offer. But they also reflect our best judgment about where we can achieve the biggest return on our reform effort. They are not specific bets on the future sources of growth, so much as broad settings that stack the odds in Australia’s favour,” Mr Brennan said.

A full copy of 5-year Productivity Inquiry: The key to prosperity is available from the Commission’s website: www.pc.gov.au