The Treasury Secretary, Steven Kennedy, has attributed Australia’s slowing productivity to an influx of new workers in the past year. Despite the federal government’s optimism about the labour market’s strength, Kennedy acknowledged that productivity is a concern, citing the impact of new workers on the economy.
According to recent data from the Australian Bureau of Statistics, employment saw a significant increase of 434,900 in the 12 months leading up to September 2024. However, a report by the Productivity Commission indicated a 0.8 percent drop in labour productivity across the economy in the June quarter.
Kennedy explained that the influx of new workers, who are initially less productive than the existing workforce, contributes to the temporary decline in productivity. However, as these workers gain skills and find better-suited jobs, labour productivity is expected to improve.
Another factor affecting productivity is “capital shallowing,” where labour inputs outpace capital inputs. Kennedy highlighted that once capital inputs catch up and employment growth stabilizes, there should be a positive impact on labour productivity.
Despite global trends in productivity impacting Australia, Kennedy emphasized the importance of focusing on factors within the country’s control, such as improving the efficiency of government service delivery. By enhancing productivity at a national level, Australia can strive towards greater economic efficiency and increased incomes for its citizens.
