Australia’s economic performance benefits substantially from the contributions of its services sector, particularly in relation to health, aged care, education, childcare and social support services. Yet traditional productivity measures fail to capture the long-term and intergenerational value of human services and unpaid care work.

Moving to a more authentic and comprehensive measure of productivity means recognising that not all value is immediate, monetised or measurable in output per hour terms. This paper outlines some practical, forward-looking approaches to ensure Australia's productivity framework reflects the true value of service-sector investments and supports better policy decisions in a time of transformation. By rethinking how productivity is defined and quantified, especially in human services, governments can better invest in the foundations of a flourishing society.

Key points

• Australia’s long-term prosperity depends directly and indirectly on the contributions made in health, education, care and other human services, yet these sectors remain undervalued in conventional metrics.
• Current productivity measures centred on output per hour worked fail to capture the intergenerational, nonmarket and preventative value delivered by the care economy and social infrastructure.
• Without reform, Australia risks under-investing in services critical to workforce participation, social wellbeing and fiscal sustainability amid an ageing population.
• Institutionalising wellbeing-based and lifecycle focused evaluations within budget processes ensures alignment with Treasury’s Measuring what matters framework and Intergenerational report 2023 goals.
• Embedding these reforms into Australia’s productivity narrative will promote more efficient and better targeted policy, better value for public investment and stronger intergenerational equity.