20, June  2023 – *Sorry for the confusion, Blog 51 notice sent in error.*

Productivity lessons from Australia

Canada and Australia have a lot in common. We both have a resource based
economy, are English speaking and have a federal political structure. We also share a
dismal productivity record.

The graph below shows that Canada’s productivity rate has declined from 82% of the
US level in 2000 to 77 % of the US level in 2020. The dark blue line represents 2020,
the light blue 2000

Source: Business Council of BC.

The comparison with the US is useful as the US is our major customer and competitor.
Australia’s productivity in 2000 was similar to Canada’s but has actually improved
slightly since then.

Australia takes productivity very seriously. The Productivity Commission was created as
an independent authority by an Act of Parliament in 1998. It is described as:” The
Productivity Commission is an advisory body. It does not administer government
programs or exercise executive power. It contributes by providing quality, independent
advice and information to governments, and on the communication of ideas and
analysis.

Australia takes productivity very seriously. The Productivity Commission was created as
an independent authority by an Act of Parliament in 1998. It is described as:” The
Productivity Commission is an advisory body. It does not administer government
programs or exercise executive power. It contributes by providing quality, independent
advice and information to governments, and on the communication of ideas and
analysis.

The Commission is an agency of the Australian Government, located within the
Treasury portfolio. However its activities cover all levels of government and encompass
all sectors of the economy, as well as social and environmental issues.”

The Productivity Commission is independent and reports to Parliament and makes all its
reports public to stimulate public discussion. It appears to be well staffed and funded,
and can initiate its own research. Its annual budget is equivalent to about $29 million
CDN.

The 2023 Productivity report runs to 9 volumes and includes 71 separate
recommendations.

Why does Australia take productivity so seriously? The answer probably lies in
geography. While Canada is situated next to a friendly superpower, Australia is in a
very isolated location closer to a definitely unfriendly superpower, so they likely feel
much more vulnerable than Canada does.

So what did they recommend? In the 2023 Productivity Commission Report they group
the 71 recommendations into 29 “Reform directives” listed into 8 categories. The 8
categories are listed below, together with a selection of the recommendations to give a
flavor of the report:
• Building an adaptable workforce – education. (7 Reform directives.
Recommendations include leveraging digital technology in schools; best practice
teaching technology; innovative schooling; growing access to tertiary education;
better targeting of investment in higher education and expanding student loan
eligibility.)
• Building an adaptable workforce – migration. (1 Reform directive.
Recommendations include better targeting the skilled migration system; improving
temporary migration and pathways to permanent residency.)
• Building an adaptable workforce – occupational licensing. (2 Reform directives.
Recommendations include reducing barriers faced by skilled migrants; and making
occupational licensing fit for purpose.)
• Building an adaptable workforce – workplace relations and platform work. (2
Reform directives. Recommendations include fair sharing of returns for productivity
improvements; and introducing independent dispute resolution for platform workers.
By platform work they mean the gig economy.)
• Harnessing data, digital technology and diffusion. (4 Reform directives.
Recommendations include faster and more reliable internet; cyber security
compliance; maximizing the value of government data holdings; and actively
promote the diffusion of new knowledge across the business community.)
 • Creating a more dynamic economy. (5 Reform directives. Recommendations
include encouraging entrepreneurship; create a better investment climate; address
;lack of competitive market incentives in highly regulated sectors; use the tax system
to invigorate productivity growth; and use open trade and foreign investment.)
• Lifting productivity in the non-market sector . (3 Reform directives.
Recommendations include implementing best practice resource allocation when
funding public infrastructure; using health funding to diffuse innovation; promote
innovation in government agencies and regulators.)
• Securing net zero and adapting to a changing climate at least cost. (5 Reform
directives. Recommendations include create policy settings that enable and respect
private adaptation decisions; elevate the Safeguard Mechanism to be Australia’s
primary emissions abatement mechanism; increase the integrity of carbon offsets;
and pursue least cost approaches in securing electricity supply.)

It is interesting to note that all of these categories can be categorized as horizontal, that
apply across the whole economy, as opposed to a vertical approach that would target
particular industries or sectors of the economy. It is also interesting to note the
emphasis given to building an adaptable workforce – 12 of the 29 Reform directives are
in this area.

Surprisingly, there is nothing about research and development, which is often seen as
driver of productivity, and nothing about artificial intelligence, which will have a major
effect on productivity.

Conclusion
There are several lessons for Canada to consider from Australia:
• The strong emphasis on human capital;
• Whether an organization similar to the Australian Productivity Commission would
be useful in Canada

Peter Josty
www.thecis.ca

Acknowledgement. I would like to thank Brian Wixted for drawing this to my attention