{"id":7989,"date":"2025-06-27T15:30:39","date_gmt":"2025-06-27T05:30:39","guid":{"rendered":"https:\/\/www.fprs.com.au\/?p=7989"},"modified":"2025-06-27T15:30:39","modified_gmt":"2025-06-27T05:30:39","slug":"whats-holding-back-productivity-and-how-to-fix-it","status":"publish","type":"post","link":"https:\/\/www.fprs.com.au\/whats-holding-back-productivity-and-how-to-fix-it\/","title":{"rendered":"What\u2019s Holding Back Productivity, and How to Fix It"},"content":{"rendered":"

Productivity is gaining renewed attention from policymakers, business leaders and economists\u2014and for good reason. As Treasurer Jim Chalmers emphasised post-election, productivity is central to economic growth. The Productivity Commission is currently conducting five in-depth inquiries. From government discussions to boardrooms, everyone is asking the same question: how do we make Australia more productive?<\/strong><\/p>\n

Think of productivity as the \u201chourly wage\u201d of the entire economy. Just as we hope our own wages rise, we want our nation to generate more income per hour worked. Higher productivity means better living standards, more innovation, and greater prosperity.<\/p>\n

A few decades ago, productivity gains meant incomes doubled in around 39 years. At today’s sluggish rate, that same income growth could take up to 64 years\u2014a looming generational setback for young Australians unless we act now.<\/p>\n

The Two Pillars of Productivity<\/h2>\n
    \n
  1. Capital Deepening<\/strong>
    \nThis is about equipping workers with better tools\u2014whether that\u2019s machinery, technology or infrastructure. Picture a farmer upgrading from a hoe to a high-tech tractor. That’s capital deepening.<\/li>\n
  2. Multifactor Productivity (MFP)<\/strong>
    \nThis measures how effectively labour and capital are combined. Training, systems and workplace culture all feed into MFP. You can own the fastest tractor in the world\u2014but if you don\u2019t know how to drive it, productivity stays flat.
    \nFor decades, MFP was the hot topic: flexible work, deregulation, training. Capital deepening quietly happened in the background. But in recent years that shift has flipped. Capital investment has slowed, and that’s now the pressing issue.<\/li>\n<\/ol>\n

    Research from the Productivity Commission reveals a startling trend: growth in capital assets per worker has flatlined.<\/strong> Firms aren\u2019t buying new equipment, and technologies\u2014like AI and modern machinery\u2014aren\u2019t being adopted at scale. Without tools, upskilling is a bandaid\u2014not the solution.<\/p>\n

    To reignite productivity, policy must broaden beyond training and deregulation. Here\u2019s what\u2019s essential:<\/p>\n