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Thursday, 13 March 2008
Page: 1762


Mr CHEESEMAN (3:21 PM) —My question is to the Minister for Small Business, Independent Contractors and the Service Economy. Has the slump in Australia’s productivity growth over the last several years been caused by a decline in mining industry productivity, as has been claimed, or is it more widespread? What are the consequences of poor productivity growth, particularly for the service economy, and what are the government, as disciplined economic managers, doing to restart productivity growth?


Dr EMERSON (Minister for Small Business, Independent Contractors and the Service Economy and Minister Assisting the Finance Minister on Deregulation) —I thank the member for his question. A recent report of the Australian Industry Group found that the slump in Australia’s productivity growth has not been confined to mining, as had been claimed by the previous government, but has actually occurred in 11 out of 12 industry sectors. This prompted the Australian Industry Group to conclude in its report:

The productivity retreat since the late 1990s has been widespread.

The report goes to the same point again when it says:

A retreat from a past period of superiority is thus widespread throughout industry—

that is, in 11 out of 12 industry groups. In answer to the question asked by the member for Corangamite, the Australian Industry Group says:

It is sometimes said that events in mining alone can explain the aggregate productivity pattern … that claim is a nonsense.

That is the claim that those opposite were making about the productivity performance of this country under the previous government. The report goes on to describe the productivity performance in Australia during the late 1990s as ‘scintillating’. The report attributes that performance to Labor reforms—Labor reforms in the shape of enterprise bargaining, Labor’s reforms to tariffs and Labor’s reforms in terms of the National Competition Policy.

Productivity growth in the service economy has stalled. Eight out of 11 of the sectors where productivity growth has stalled are service economy sectors. That has been a massive squandered opportunity. Money has been pouring in that could have enabled the previous government to invest in modern sources of productivity growth, but it squandered that opportunity. It did not invest in skills formation, which is a modern source of productivity growth. The previous government ignored 20 separate Reserve Bank warnings about the skills crisis that was developing in this country for over a decade. The previous government could have invested in a national broadband network, but it did not. Rather, it criticised our national high-speed broadband network. In the area of infrastructure, the broadband initiative is designed to lift productivity growth in the service economy, particularly for small businesses.

The previous government shirked the task of regulatory reform. It commissioned two reports, one in 1996 and one in 2006, whose recommendations were virtually identical, indicating that over a period of a decade the previous government did nothing to cut back on the accumulation of red tape; yet through areas such as the business activity statement and a whole raft of other regulations it presided over what the Business Council of Australia has described as the creeping re-regulation of the Australian economy. So what happened to productivity growth in the last year of the previous coalition government? The latest Australian Bureau of Statistics figures confirm that productivity growth was not slow, it was not low—it was zero. It was absolutely zero—flat as a tack. Yet the previous Treasurer twice came into this parliament, in late 2006 and again in mid-2007, and declared that productivity growth at the time was at or even ahead of the previous productivity cycle. It was zero. It was flat.

A coalition government that denied that Australia had a productivity growth problem was never going to do anything about it—and it never did do anything about it. The Rudd government will restart productivity growth in this country by investing in the new sources of productivity growth. In doing so, it will fight the inflation rate that it inherited from the previous government, which is at a 16-year high, as well as the second-highest interest rates in the developed world—12 successive interest rate rises on the trot. We will invest in skills, we will invest in infrastructure and we will invest in regulatory reform. The Rudd government will invest in these forms of productivity growth. We are building a modern economy to meet the challenges of the 21st century for the nation and for the working families of Australia.