Productivity comes from liveable cities

Lifting Australia's productivity goes beyond just tax and competition reform.

That's the view of consultants Deloitte in a new report, saying productive and liveable places - from inner cities to rural and remote communities - will be critical in delivering the future living standards that Australians have come to expect.

"Flourishing places act as magnets for people, investment and industry, while languishing places give many people a reason to go elsewhere," Deloitte Access Economics partner Ian Harper says.

Professor Harper says as Australia moves from farms and factories to a more service-based economy, living standards will increasingly depend on economies of scale and creativity and innovation, generated by people living and working closely together.

The challenge is to create and nurture places where people want to live and work, and then catalyse that into a virtuous circle of economic prosperity, rising living standards, and a vibrant society and culture, he says.

"Governments and businesses shouldn't just think about levers such as tax or competition reform, as important as they are, to meet Australia's productivity challenge," Prof Harper says.

The report is the fifth in Deloitte's abiding the Lucky Commuter series that started in 2011 to encourage debate across business, industry, governments and communities on the big issues facing Australia and its future prosperity.