The Australian economy is ‘increasingly stagnant’. How do we release the handbrake?

Australians could see wages and living standards grow under a plan to address an issue that has been pulling the handbrake on the national economy for decades.

The Productivity Commission released a report on Thursday night that found making businesses more dynamic would help reverse the downward trend in productivity.

“A productive economy is constantly renewing itself through businesses starting, growing, adapting and closing where necessary – by these measures Australia’s economy has become increasingly stagnant,” Commissioner Alison Roberts said.

Productivity is the amount of value produced from the available resources and is linked to higher wages, cheaper and better-quality goods and services, bigger business profits and overall economic growth.

It has been a problem within the economy for decades, declining from a peak of 1.8 per cent in 2009-10 to 0.8 per cent in 2023-24.

The report found that Australia could raise productivity to 9.8 per cent if it brings up its management capability to that of the US.

Read more

NAB profits fall to $6.1b in ‘challenging economic environment’

“Australian firms are good at identifying opportunities but less effective at changing and evolving,” Commissioner Stephen King said.

“We can see that in the fact that Australian businesses are lagging other countries in adopting AI.”

Only 12 per cent of Australian businesses reported using AI in their workforce in 2024-25, the Australian Bureau of Statistics said in June, compared to up to 20 per cent in the US.

Another area for improvement was regulation, with the report finding boards spent 55 per cent of their time on compliance in 2025, up from 24 per cent 10 years ago.

“We know that the burden of regulation is growing,” Roberts said.

“Businesses often struggle to work out which rules apply to them, where to find authoritative guidance and how different regulatory requirements fit together.”

Labor has been criticised for failing to cut business regulation, with the Coalition vowing to rewrite five related laws.

It said it would cut the construction code from 2000 pages to just 200.

The report recommended the government slash regulation and make it easier for businesses to understand their obligations, including a “tell-us-once” approach so they do not have to repeatedly provide agencies the same information.

Some commercially viable businesses led by women or Aboriginal and Torres Strait Islander people were also found to be struggling to get funding due to “one-size-fits-all” lending processes, while businesses facing insolvency incurred “unnecessary” costs and delays.

Roberts said no single reform would restore Australia’s economic dynamism but the government could help by removing some avoidable barriers that chip away at growth.

Australian Chamber of Commerce and Industry chief executive Andrew McKellar said removing regulation was welcomed but the report missed tax and industrial relations issues.

“Assessing business dynamism without looking at tax and workplace relations is like a doctor being blocked from checking the heart or lungs. You can ease symptoms, but you miss what is killing the patient,” he said.

Read more

RBA’s ugly interest rate hike spells rocky times for Australia

“After five interest rate rises this year, and with inflation still too high, we need a national turning point on productivity.”

Last year, the Productivity Commission estimated the average full-time worker will be $14,000 a year worse off by 2035 if the economy does not rediscover its previous growth and continues on its downward trend.

Treasurer Jim Chalmers in October said he takes the long-standing productivity challenge very seriously but noted it would take time to reverse the figures.

“We have put in place the biggest and broadest productivity package in any budget for at least three decades,” he said.

“I don’t think any objective observer would expect that a productivity package announced in May and being bedded down with the states and with others would automatically fix our productivity challenge towards the end of October in the same year.”