A recent report from the Productivity Commission has highlighted a concerning trend: Australia’s productivity is stagnating, and experts are pointing fingers at management practices rather than workers. The report found that even with Australians working record-high hours, productivity in industries like care is going backwards. Here’s Sally McManus, Secretary of the Australian Council of Trade Unions, from the front lines of this fight. She attributes the downturn to bad management decisions and failure to invest in new technology.
The results show that the last decade–long productivity standstill is largely the result of a tangled web of socio-economic forces at work. These burgeoning service industries, now responsible for 80% of Australia’s GDP, are finding it increasingly difficult to improve productivity. This problem is exacerbated by the technology and management practices under-investment that is endemic to the industry. Cumbersome regulations dissuade companies from making those big investments and committing.
Decline in Care Sector Productivity
For one, the care sector has seen the fastest growth in employment and hours worked. As a consequence, it has indeed become a major bogeyman in the productivity debate. The report points out that this boom has created an opposite impact by creating a statistical drag on aggregate productivity. Over the last year, multi-factor productivity growth was just 0.07%, a dangerously small number.
Economist Sally McManus suggests that the tools we’ve based our measurements of productivity on might not be enough to reflect the realities of the emerging care economy. She states,
“Actually, it is on [businesses] — it’s on their management practices and it is certainly on their refusal to invest in technology.”
This feeling is echoed throughout the industry. Economists across the ideological spectrum are calling for a rethinking of how we measure productivity, particularly in sectors like care that our communities depend on but that our economy consistently undervalues.
The Impact of COVID-19 on Productivity
3 Big swings, lots of misses During COVID-19, Australia enjoyed a short-lived “bubble” of productivity breakthrough. This bump was temporary, with most of these gains erased by late 2023. Broader economic conditions—like taxation, deregulation, and compliance—have steered businesses away from investments that would drive improvements in productivity.
Innes Willox, Chief Executive of the Australian Industry Group, argues strongly that businesses need to start changing their business model. He asserts,
“We have to find ways to allow businesses to invest in their people.”
This move toward more productive, rational investment is considered by many to be key to reversing our ongoing productivity crisis.
Calls for Investment in Technology and Management
All these challenges are universally recognized by experts as being in need of managed focused effort to work on better practice and to invest in technology. Economist Alex Robson reminds us that we need to work smarter, not harder.
“What you need is to be able to work smarter,” he advises.
There is unprecedented consensus among experts that investing in initiatives such as the National Disability Insurance Scheme (NDIS) is important. Once deployed, this investment will dramatically increase productivity in the care sector. This investment would not just improve service delivery, it could establish a better long-term growth and efficiency model.
The challenges are broad and deep and demand urgent action. Businesses must reconsider their approaches to management and technology investments if they hope to reverse the current trends negatively impacting productivity.
