The productivity roundtable came out with some ideas that could further stall productivity, rather than boost it

The Productivity Roundtable in Canberra in late August promised to reset Australia’s productivity agenda and get us back on track for GDP growth, rising standards of living and a more resilient economy. A worthwhile goal which promised some interesting ideas. However, the roundtable was renamed shortly before it was held – as the Economic Reform Roundtable – and what came out of it was a bunch of ideas that could be neutral, might clear-out unnecessary red-tape and tariffs that was introduced by governments in the first place, or – at very worst – achieve the reverse of what was intended.

We’ve all read the commentary around this event, but from the perspective of many Australians, the Roundtable was notable for including very few business owners – the people who can most strongly influence productivity. The Treasurer said, after the Roundtable: “for all of us, higher living standards is the holy grail and a more productive economy is how we deliver it.” Jim Chalmers got that right, because productivity growth is the generation of more output from the same person-hours. But here’s what the business owners might have said if admitted to the meeting:

Higher Taxes For Superfunds

What has superannuation taxation got to do with productivity? In particular, taxing an extra 15% of super balances over $3 million? An outcome of the Roundtable was an announcement from the Treasurer about ‘intergenerational equity’, to be addressed by the superannuation tax system. But it is unclear how this aids productivity – improving productivity across businesses and the whole economy is not going to be achieved by increasing taxes on older folks’ superannuation, land and family homes. One of the reasons for the capital gains tax concession, when you sell a business and put the proceeds into super, is that the business owner is incentivised to reinvest capital and grow the business during its lifecycle, knowing that they can sell the business at retirement and put the money tax effectively into their super. If superannuation members are penalised for having more than $3 million in their accounts, the incentive to keep capital in the business is weakened. Who knows which business decisions – to grow, to diversify, to modernise – will be abandoned for this reason?

Artificial Intelligence

The government came out of the Roundtable promising to implement AI plans both inside government and nationally. I’d be interested know what these plans are, because most manufacturers are already using AI and they’d probably say it’s both not a magic elixir for all productivity problems and also very beneficial in specific uses. The thing about AI is that it is a tool that can only work with what is put into it. And it doesn’t neutralise other factors: if you have a poor tax system, too much red tape and high energy costs, AI is unlikely to overcome these deficits to generate productivity growth. 

EV Road User Charge

The fact that this came out of a meeting originally called the Productivity Roundtable, is a hint about why the name of the event had to be changed. Do you improve productivity by increasing road user charges, or any taxes? 

Training Tax

Another idea was essentially business owners being charged 1.5% tax if they don’t spend enough on training. It’s hard to see how this is productivity-boosting. The way to do more training is to incentivise apprenticeships and traineeships, with the decisions in the hands of the business owners and managers. They know where training investment (if any) is best deployed. The problem with this idea is that high taxes and big government spending are usually correlated with low productivity – it hinders productivity rather than helps it.

Universal Basic Income

In the lead up into the Roundtable we saw several proponents of universal basic income arguing their case in the media, foremost among them The Mandarin, which is the Canberra public service publication. Against all experience to the contrary, these proponents argued that paying everyone a basic dole would boost productivity and entrepreneurship. I’m not sure if this was raised in the actual three days of the Roundtable, but the fact that it tried to find a way in is a bad sign for the Australian economy. An ineffective way to improve productivity is to incentivise less work.

Four Day Week/Work From Home

One of the participants of the Roundtable was the ACTU, which proposed that workers enjoy a four-day week, and use sector-specific alternatives where a four-day week is not possible, such as more rostered days off and increasing annual leave. In addition there was talk of having more generous work from home provisions. The ACTU argues that initiatives like these will have productivity benefits, but this seems contrary when considered from the manufacturing perspective because it seems to argue against, not for, productivity: if productivity can be measured by units produced per person per day, then adopting a four-day week and more work from home runs the risk of producing less to begin with ie. shrinking the pie. And that means negative GDP growth. Not all work, in the manufacturing sector particularly, can be done from home. Perhaps we need to have some business owners in these meetings – we could ask them what four days of output would do to their productivity?

What Wasn’t Said

And then there were the topics not really canvassed in the Roundtable…

• Cost of energy – high energy prices add costs to all stages of the economy and create hesitation around crucial actions such as capacity planning
• Cost of employing – high overheads attached to an employee are a drag on productivity
• Government spending – high government spending correlates to low productivity

The Lack Of Business Owners

The Roundtable didn’t really tackle productivity but it did allow non-business people to ask for more taxes. The lasting message I got from the three days was that older people have more wealth than young people and therefore they have more tax benefits arising from super and property ownership. If you taxed a 50-year-old more and a 25-year-old less, where does the productivity improvement come from? You’ll make young people happy for a while but you haven’t encouraged businesses to invest in greater output per employee. This discussion has further to run – hopefully next time they’ll ask some business owners to the meeting.