Presented by Jones Partners
Since the pandemic, the nature of productivity within Australia has been a hot topic of discussion. Productivity, which refers to how efficiently goods and services can be produced, has been slowing for decades. Productivity describes a relationship between the input (encompassing materials, knowledge, labor, time) and, creating an output (goods and services). Historically, increasing productivity has been the driving force behind increasing living standards within society. Increasing productivity generally causes prices to fall and work hours to also decline, increasing workers’ free time and reducing the cost of goods and services.
Technological advancement is at the crux of increasing productivity, and Australia has been lagging behind the international community in its technological investment for years. Australia is fortunate to have a plethora of natural resources, of which it has been heavily dependent upon for revenue for decades. However, as the effects of climate change become increasingly extreme, it will be crucial for Australia to pursue a path towards technological innovation and renewable energy sources.
The Australian market is currently a hostile place for new ideas. There is an absence of entrepreneurial incentive, as well as shifting investment towards less productive industries. Other flagged contributors include labor shortages across certain industries, and lack of free market competition, which is causing few players in certain sectors to dominate and become stagnant.
Working from home arrangements have also faced mixed criticism, in the discourse of declining productivity. Some are skeptical, claiming it reduces communication, inhibits collaborative learning and the lack of supervision disincentivizes productivity. Other research shows working from home can enhance productivity, by reducing commute times, retaining talented workers through flexible arrangements, and helping to cut out unhelpful workplace distractions and improving efficiency. Effective digital processes and management are also crucial for productive hybrid work arrangements.
Its time Australia made a cultural shift in its approach to productivity. Heavy fiscal support during the pandemic severely repressed competitive forces, inhibiting the business cycle from eliminating unproductive and commercially unviable firms from the market and allowing resources to be allocated to the strongest, most effective innovators. This idea is referred to as “creative destruction” and is a long-standing driving force behind capitalist innovation.
It’s time Australia renews its entrepreneurial spirit. There must be a strong focus on increasing competition. Public monopolies which dominate certain industries must be challenged, and private sector investment must be effectively incentivized.
Insolvency statistics will also remain consistent until the next period of rapid economic change occurs. Increasing cases of insolvency cause undeniable distress to individuals and businesses, but they are also an essential economic reality, operating as the mechanism for a society which dares to innovate, reset, and ultimately, progress.