Claims that Australia faces a productivity crisis are overblown. Weak productivity didn’t cause the current problems facing Australian workers (falling real wages, high interest rates, unaffordability of essentials like housing and energy). Nor will higher productivity fix these problems. Proactive measures to lift wages and living standards are needed if stronger productivity growth is to support stronger living standards.

This report presents empirical evidence showing that productivity growth in recent decades has not been equally reflected in higher real wages and better living standards. The report concludes with a broad agenda of high-level policy themes that should be pursued to challenge and support Australian workplaces to become more productive – and to ensure the resulting gains are broadly shared.

The report identifies several key factors contributing to the longer-run slowdown, including:

• Persistently weak business investment in capital, machinery and equipment and innovation.
• A regression in the average capital intensity of production in Australia.
• Underinvestment in the public capital stock, including transportation, energy and communications infrastructure.
• Failures in Australia’s skills and training system, reflected in a sharp decline in the proportion of Australia’s workforce completing vocational training.
• Chronic macroeconomic weakness and underutilisation of labour.
• Gaps in labour standards and industrial rules.

Key findings

• Productivity grew four times faster since 2000 than average wages adjusted for consumer prices; it grew almost twice as fast as average wages adjusted for producer prices.
• If workers had received wage increases since 2000 that matched productivity growth, wages would be as much as 18% higher than they are at present – worth $350 per week, or $18,000 per year.
• Over time, the failure of wages to keep up with productivity has created a 'productivity debt' effectively owed to workers, worth hundreds of thousands of dollars per worker.