Key facts
- Australia faces stagnating productivity growth, leading to slower real wage and income increases.
- The late millennials are the first generation not to be better off than the previous one at the same age.
- Developed countries, including Australia, have seen a halving of productivity growth on average over the past decades.
- The U.S. has shown healthy productivity growth post-Covid, with potential contributions from AI adoption.
- Wood believes government policy creates the ecosystem for productivity, but businesses drive it through investment and technology deployment.
Danielle Wood, chair of Australia's Productivity Commission, is emphasizing the critical need to boost the nation's productivity growth rate, which has stagnated for about a decade. This slowdown has directly impacted living standards, resulting in slower growth in real wages and incomes, and has led to the late millennials being the first generation not to be better off than their predecessors at the same age. Wood highlighted that this trend of slowing productivity growth is widespread across developed countries, with many OECD nations experiencing a halving of their growth rates in recent decades.
In contrast, the U.S. has shown robust productivity growth, particularly since the Covid-19 pandemic. Wood suggests this may be partly attributed to more advanced AI adoption and a greater willingness to re-examine and re-create workflows, a level of integration that Australia is currently behind on. While acknowledging the role of government policy in creating a conducive environment, Wood stressed that ultimate productivity gains stem from businesses' risk appetite, investment decisions, and their skill in deploying technologies and managing their workforces.