The Productivity Commission's 5 Year Review - What We Predict

Abundium members expect to welcome many of the recommendations of the Productivity Commission’s 5 year review, the Key to Productivity, when it is publicly released by Treasurer Jim Chalmers. 

A part of this is the likely recognition of the contribution multinational corporations make to Australia as a channel for importing innovation as well as capital and IP while creating employment and productivity enhancing opportunities for their local Australian employees. 

The CEO’s and their leadership teams met with the Commissioner in February 2022 when he was just starting his work on the report and then again this February to discuss what he had discovered and learn his thinking on what needed to be done. 

The business leaders had highlighted issues in education, immigration, blocks to innovation, inefficient use of data and digitalization, regulation and constraints on workforce participation that all impeded Australia greatly enhancing its productivity. 

In speaking with the Commissioner they gained confidence that many of these would be addressed in the 70 recommendations that come with the report and are hopeful the Government will adopt them. 

It is anticipated that there will be proposed changes to immigration laws that recognise the complexity of roles and the opportunities to take advantage of broader skill sets rather than be limited by narrow, pre-defined, earned qualifications as the pre requisite for visas.  

Additionally changes are expected for foreign student visas, giving them greater opportunity to assimilate into the workforce and remain after their study visa expires.  

These are part of a mindset change where immigration is to be seen not just a gap filler for local shortages but as a means to invite innovation into the country and foster a more diverse workforce with broader range of capabilities. 

To drive this there are likely to be recommendations about the role of the Foreign Investment Review Board enabling it to be a simpler process for attracting FDI while maintaining its role on protection of national security and related assets. 

However there should be a recognition that globalisation has productivity benefits and returning to being too protectionist would have a negative impact and lead to less desirable outcomes. 

Instead, international firms should be encouraged to bring their IP to Australia to enable greater local innovation. 

The report is expected to highlight the opportunity, and challenge, in making greater gains in the services sector which now dominates much of the Australian economy. 

Healthcare and Education are two of the industry verticals where there is a lag in productivity enhancements over prior decades compared with mining and agriculture. It is expected that there will be a call for greater adoption of technology to drive gains here. 

Similarly there will be an emphasis on greater adoption of data sharing and a role for the government to help identify inefficiencies and allocate resources to drive innovation and create the capacity for change.  

We look forward to reviewing the full report when it is released and are hopeful that the government will respond positively to many of the recommendations. 

Abundium's submission

The below is part of the submission Abundium made to the Commission as part of the review process: 

Education and Skills: There is a general consensus that the Australia Education system is not fit-for-purpose: 

• graduates are not coming out with the necessary skills to rapidly assimilate effectively with the requirements of modern business.  
• Training courses are archaic and not sufficiently adaptable to cater for short form learning and incremental education. 
• There needs to be a greater focus on increasing the number of Technology and Engineering qualified students. 
• Innovation: Australia is recognized within the MNC community as an excellent location for innovation to occur. Its relative geographic isolation allows for experimentation without “being in the spotlight” while ethnic diversity provides a good sampling of potential consumers.  
• In addition, Australia is also seen as highly effective in adapting to the use of new technologies, either as is or modifying locally to make them fit for purpose.  
• There is a feeling that there could be a greater role for Governments in supporting the amplification of Australia’s capabilities in these areas both to drive international business growth but also as a means of attracting and retaining talent. 
• More than this, Australia should be looking at what the industries of the future will look like and start planning now to be a critical part of their eco system, this will require imagination and a move from thinking about just recreating old industries back on shore. 
• Impact of Digitalization: There was a general discussion on the impact of digitalization and emerging technologies, particularly looking at lifestyle entertainment enhancements, with the focus more on the positive impact it can have on standards of living and creating greater efficiencies. The question was asked as to how these tools can be measured given, they do not have a direct correlation with the traditional way in which productivity has been measured? 
• Cost of doing business in Australia: The following are not all necessarily directly related to potential productivity improvements, while some are others are identified as barriers to foreign investment in Australia with the assumption that greater investment will drive productivity gains. 
• Regulation: Complexity of regulation within Australia both at a Federal and State level is seen as a hinderance to efficiency. That can either be the lack of skills recognition, the different standards on a State x State basis and a lack of harmony with our major trading partners. 
• Taxation: Australia is seen as a complex and highly taxed by global comparison which serves as a deterrent to FDI. Simplifying the tax code and bringing elements in line with global standards promoted by OECD. 
• Salaries: Australia is seen as a relatively expensive place to employee people which acts as disincentive to hire people and grow the Australian business. While wage inflation has been more evident over the Covid related period due to lack of skilled workers, graduating foreign students and temporary labour force, cost of employment has long been a barrier to making Australia a preferred choice for foreign companies looking to expand in the region. 
• Economic participation: There is a view that a great driver of improved productivity would be the introduction of policies that enable greater economic participation. Too many women and carers are excluded from the workforce because of the constraints in childcare and the lack of imagination in the traditional working model. Addressing how and when work is performed, with the correct infrastructure to support it, would add significant value. The last two years of Covid related restrictions have shown change is possible but broader industrial relations policy reform is needed to facilitate lasting change.