Australians are on a treadmill which keeps getting faster. We’re working longer hours, but the extra miles we’re putting in are keeping us from falling off, rather than moving us forward.
Last year, the Productivity Commission said we sharply increased our working hours. In fact, we pushed them up by the most on record (excluding the pandemic period), according to the commission’s acting chair, Alex Robson.
Australians are working longer hours, but that doesn’t necessarily increase our productivity.Credit: Jason South
But extra hours don’t improve our productivity. Ideally, we want to produce more with what we’ve got, rather than using more time or resources.
If we had a collective performance review, we’d probably get a pat on the back but no pay rise – which is basically what happened for a while. From about March 2021, wage growth fell behind inflation: prices rose considerably, but wages only edged up. Then, in the three months to September last year, wage growth finally eclipsed the inflation rate.
But the Reserve Bank won’t be happy to see stronger wage growth unless it comes with higher productivity. Why? Because when companies agree to pay their workers more, but their production hasn’t increased, those businesses will probably raise prices to protect their profit margins, feeding back into inflation.
At least, that’s the theory. The extent to which wage increases really contribute to inflation is up for debate.
If we had a collective performance review, we’d probably get a pat on the back but no pay rise – which is basically what happened for a while.
The Reserve Bank’s favourite word, and its prescription for the inflation problem afflicting Australia (and much of the world) is ‘productivity’. If we can jump-start our productivity, improving our supply of goods and services, then we might be able to put a lid on inflation without dealing too much pain through interest rate rises aimed at dampening demand.
That’s of course easier said than done. Our slowing productivity problem is decades old. From the late 1980s to the early 2000s, Australia’s productivity growth, measured in output per hour (adjusted for inflation), was about 3 per cent. During the 2010s, the pace dropped to about 1.2 per cent.
The muscle we need to flex to bring inflation down with less pain
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14.01.2024
Australians are on a treadmill which keeps getting faster. We’re working longer hours, but the extra miles we’re putting in are keeping us from falling off, rather than moving us forward.
Last year, the Productivity Commission said we sharply increased our working hours. In fact, we pushed them up by the most on record (excluding the pandemic period), according to the commission’s acting chair, Alex Robson.
Australians are working longer hours, but that doesn’t necessarily increase our productivity.Credit: Jason South
But extra hours don’t........
© The Sydney Morning Herald
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