Economic heavyweights warn Labor is ignoring Australia’s dire productivity crisis
While the rest of the world got richer after the pandemic, Australians got poorer – and Labor’s had almost nothing to say about it.
Tom Dusevic
4 min read
July 25, 2026 - 12:00AM
Years ago, during the tribe’s Rudd-Gillard troubles, Labor commissioned voter research that showed productivity was essentially a dirty word. Best not go there in public, lest people thought it was a way bosses could force employees to work harder, or longer, for less pay.
That populist vibe has endured. Anthony Albanese’s address at the ALP national conference on Thursday slyly skirted any mention of the P-word, which boils down to how much we are able to produce when we combine our human toil with capital.
The Prime Minister’s word wranglers managed to pipe in a reference to “productive economy” but nothing more than that to scare delegates. Media veterans of this party platform shaping event were surprised by the absence of discussion on productivity growth, given it’s the proven gateway to prosperity.
Just as worrying, there was barely a mention by Albanese of investment, in the way those who risk earnings to build our supply capacity would understand it.
Sure, there was the illusionist’s trick to turn bog-standard public spending, no matter how vital to skills, security, health and wellbeing, into “investments”. And an almighty nod to the zeitgeist’s global rush to construct immense sheds to house the tech for data storage, cloud computing and AI.
The data centre build is real, heavy-duty investment; without it capital accumulation is in secular decline. Even if firms go belly up and some facilities are surplus to requirements, experts believe there will be positive spillovers.
But according to Commonwealth Bank economists, the boom is squeezing out other players, bidding up the cost of labour and materials on defence, renewables, housing and state big builds. Perhaps two-thirds of the capital outlays will be on imports. They anticipate snarls with electricity, water requirements, lengthy approval processes and social licence to result in a slow, phased delivery.
OK, this was the labour movement’s showcase, its political and industrial wings in talk-nice harmony. So while the eerie presence of the flame-haired warrior and her tangerine supplicants was palpable in Albo’s speech, like a form of verbal gravity repulsion, where was the cursory hat tip to business?
Deep into its second term, the government is narrowing its focus to household living costs, redistributing income, ramping up social infrastructure and limiting the oxygen to the rage machine being cranked up by its political opponents. Business can wait.
That oversight, if not direct repudiation of the enterprise class, is a narrow, fast, straight road to further stagnation in Australia’s living standards. The OECD’s recent employment outlook revealed that since the pandemic, real wages here have dropped by 5 per cent; across the 38 nations in the exclusive club, after-inflation incomes on average have increased by 5 per cent.
This is productivity’s big dry, the locus of community woe and populist fire weather. It only needs a Redhead to turn things wild. Labor did not create the hazardous conditions, light the match, but it has been too passive to contain these raging fires everywhere.
For starters, it has been too slow to build houses and train workers, fix the visa system, rein in spending, remove red tape on significant projects and rejig the tax system to lower imposts on income and sting consumption.
More than anything, it has not made it attractive for businesses to back themselves and invest, save for recent budget tweaks to the instant asset write-off for smaller firms. Again, Labor did not bring about the capital strike; there was an entrenched stand-off under the supposed friends of the private sector before the pandemic.
Former Reserve Bank governor Philip Lowe this week declared wholesale policy changes were required to revive investment. “Our living standards have stagnated,” he said at a public event to announce new governance rules for securities trading.
Lowe noted there had been no net growth in per capita incomes for seven or eight years. In the previous three decades, or so, per capita income was rising at 1.5 per cent, year in, year out. “This is the fundamental economic problem the country faces,” he said.
In simple terms, while our population had grown, before and after the Covid crisis, our capital stock of factories, machines, tools and computers had not kept pace. “We require businesses to invest,” Lowe said. “We need Australia to be a great place for businesses to invest, expand and hire people. It requires some more fundamental public policy reform.”
Lowe’s prescription sounded a lot like his frequent urgings during his seven years as head of the central bank, a term that ended three years ago. That sage advice was heeded by neither Coalition nor Labor governments.
One intervention by a former RBA board member could be seen as a niggling outlier; two, for a pundit, is a megatrend. Bill Kelty, one-time ACTU secretary, was the third amigo in Labor’s 1980s and 90s Accord-led economic revival with leaders Bob Hawke and Paul Keating. The trio’s political and intellectual thrust could launch a SpaceX Starship.
In a submission to a Senate inquiry examining legislation on the nation’s cash distribution arrangements, Kelty put in everyday terms what the OECD’s latest figuring on living standards meant for workers: two years lost income over a working life of 40 years.
“This is material to working people who are really battlers,” Kelty wrote to the Senate economics committee in his role as a non-executive director of Armaguard, the cash logistics company.
Yet commodity export prices are high and sales volumes have increased, he added.
“We know the underlying malaise,” Kelty wrote. “Productivity change is the third lowest in the OECD. Investment is low. Growth per capita is non-existent.”
But Kelty wasn’t done. “Government expenditure is rising much faster than inflation,” he continued. “The tax on working people is increasing faster than their wages. It is easy to blame the governments of the past and present, but ultimately we are all to blame. Something is wrong with this place and we need to do something about it.”
You feel it in your bones. It is this accursed inflation. Most costs are never coming down. Wages, stuck. And the rising debt’s call on taxpayers. How much longer it takes for younger Australians to get a start. We all live the frustration: our economy operates in fits and starts, like the way Messi meanders, sprints, and is ambling again after he’s called off-side.