Measuring the impact of the Productivity Agenda - KPMG report

28 May 2010

The purpose of this report is to quantify the potential contribution of the Government’s participation and productivity reform agenda in education, employment and workplace relations (the Productivity Agenda) to labour productivity, the labour force participation rate and the Australian economy. It is a quantitative analysis of the benefits that can be expected from successful delivery of the national reform agenda.

The Productivity Agenda involves a broad approach that aims to lift national productivity and build social inclusion through reforms to early childhood, secondary and tertiary education, employment and workplace relations. This reform agenda involves the establishment of national reform targets, supported by policy and program initiatives that are developed, negotiated and monitored through partnerships between the Australian Government and the States and Territories. The policy goal is to drive partnership initiatives that will contribute to addressing the economic challenges facing the Australian economy, such as those posed by global competition and major demographic changes, by boosting productivity growth and participation in the workforce, which would, in turn, support an increase in living standards.

Initial modelling of the potential contribution of the reforms was undertaken by the Productivity Commission in 2006. This Report seeks to complement and extend that analysis, having regard to the progress that has been made since that time in setting targets and articulating the strategies that are to be used to achieve those targets. This extended analysis incorporates, as far as practicable, the latest quantitative targets from the Council of Australian Governments (COAG), new initiatives in key reform dimensions (including the Government’s response to the Bradley Higher Education review, child care rebate increases, commitments in early childhood development and paid parental leave) as well as more recent empirical evidence.

KPMG Econtech has examined key elements of each stream of the reform agenda, together with domestic and international evidence, to develop reliable estimates of the impact that achievement of the reform targets would have on individual cohort and economy-wide labour productivity levels and labour force participation rates. These estimates are then used as inputs into a macro-economic model to determine Gross Domestic Product (GDP) and employment estimates.

This report models the benefits of the national reform agenda targets being achieved and finds that these benefits are substantial. There are two factors that should also be taken into account when fully assessing the national reform agenda.

• First, this report shows the benefits if all targets are met. This report does not assess the relationship between policies and their associated targets.

• Second, the estimation of costs is outside of the scope of this report. The net benefit of the policies would need to be ascertained by subtracting such an estimate of the costs from the benefits estimated in this report.

The headline finding of the report is that, if all of the reform targets are achieved, the reform agenda will contribute a substantial gain in employment and the growth potential of the Australian economy.

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