A recent article by Australian Industry Group on the 2026 Intergenerational Report sparked an interesting question for manufacturers. If Australia has experienced effectively zero productivity growth since 2019, and meaningful reform may take years to materialise, what should businesses be doing in the meantime?
The national productivity discussion often focuses on government policy, regulation, taxation, skills development and infrastructure. All are important. However, manufacturers cannot afford to place productivity improvements on hold while waiting for external change.
For many businesses, particularly small and medium manufacturers, the most immediate productivity opportunities are sitting inside their own operations.
Productivity Is Not Just a Policy Problem
When productivity is discussed in Australia, conversation frequently turns to labour costs, industrial relations settings or regulatory burden.
These factors undeniably influence competitiveness. As Innes Willox observed, stronger productivity growth will require a combination of technological advancement, workforce capability, regulatory efficiency and investment competitiveness.
Yet productivity is ultimately created at the enterprise level.
It is improved every time a business reduces waste, shortens production cycles, increases equipment utilisation, improves workforce capability or makes better use of data.
Manufacturers operating in challenging conditions often underestimate just how much control they retain over these outcomes.
The Hidden Cost of Operational Friction
One of the most common barriers to productivity is not a lack of effort.
It is friction.
Production delays, poor workflow design, duplicated administration, manual reporting, inventory inaccuracies and rework all quietly erode output.
Many businesses have adapted to these inefficiencies over time and no longer recognise them as productivity issues.
A manufacturer may invest heavily in new equipment while still losing hours every week to scheduling bottlenecks. Another may implement new software while maintaining reporting processes that require multiple layers of manual handling.
The result is that productivity gains promised by investment never fully materialise.
The businesses achieving stronger performance are often those focusing first on removing friction before pursuing major capital expenditure.
Waiting for AI Is Not a Strategy
The productivity conversation has understandably become linked to artificial intelligence.
AI will undoubtedly play an important role across manufacturing, from predictive maintenance and quality assurance through to supply chain forecasting and customer service.
However, many organisations risk viewing AI as a future solution rather than a current capability.
Technology only amplifies existing processes.
If workflows are inefficient, data quality is poor or decision making is inconsistent, AI may simply accelerate those shortcomings.
The manufacturers most likely to benefit from AI are those already investing in process discipline, data governance and workforce capability today.
In other words, the groundwork for future productivity is often laid long before the technology arrives.
Focus on Controllable Productivity Drivers
While broader economic reforms remain outside a manufacturer’s control, several productivity levers remain firmly within it.
These include:
- Improving production planning and scheduling
- Reducing downtime through preventative maintenance
- Strengthening workforce training and cross functionality
- Measuring and addressing causes of rework
- Reviewing inventory management practices
- Streamlining administrative processes
- Enhancing management reporting and operational visibility
- Investing in technologies that solve specific operational problems
None of these initiatives are particularly glamorous.
Their impact, however, can be significant.
Small improvements achieved consistently across multiple areas often deliver more value than a single large transformation project.
The Role of Leadership
Productivity is ultimately a leadership discipline.
The highest performing manufacturing businesses tend to have leaders who regularly ask the same question:
“Where are we losing time, effort or resources that do not create value?”
That mindset creates a culture of continuous improvement rather than periodic improvement.
In an environment where external reforms may take years and economic conditions remain uncertain, that mindset becomes even more valuable.
The Bottom Line
The Australian Industry Group’s commentary on the Intergenerational Report highlights an important national challenge: Australia needs a productivity revival if living standards and competitiveness are to improve.
But manufacturers do not need to wait for Canberra to solve the problem.
The businesses that emerge strongest from this period are unlikely to be those waiting for reform, subsidies or the next technological breakthrough.
They will be the organisations that use this period to relentlessly improve the things they can already control.
National productivity may require policy reform.
Business productivity starts on the factory floor.