Pundits berating the Labor Government over productivity are getting it all wrong, asAlan Austinreports.

THE ALBANESE GOVERNMENT is under pressure to do something about productivity in Australia. It is committed to so doing.

But what if, in fact, all is well? What if the economy is humming along nicely, but the agencies are just not measuring things accurately?

Definitions and history

Labour productivity is defined by the Bureau of Statistics (ABS) as the ratio between economic output and the total input of factors required to achieve it. They calculate it quarterly by dividing gross domestic product (GDP) by total hours worked.

Jim Chalmers has cracked open the reform vault, now comes the hard part getting Australians to buy whats inside.

Historically, this has not been an important metric and seldom a topic of political point-scoring. It has generally increased steadily regardless of the party in power, with occasional blips due to global recessions or local events such as extensive floods.

Between the 1996 first quarter (Q1) and Q4 of 1999, there were 15 straight quarterlyrises. Then, between 2011 Q1 and 2016 Q2, only one of those 21 quarters was a significant dip. So, as automation and I.T. have advanced, ever-increasing productivity has been taken for granted.

If we examine the 38 developedOECDmembers today, some still enjoy this benign situation. The chart below shows five economies withproductivityrising from 2016 to 2025, albeit with a bit of a mess in the middle due to COVID.

(Source:Trading Economics)

If that is normal, then Australias experience since 2016 is seriously weird. After steadily rising since records began in the 1970s, productivity plateaued between 2016 and 2019. It went crazy during COVID with an aberrant surge and has declined since then. It has flatlined at 99.5 index points for the last three quarters, well below 2020 levels.

This is nothing like the progress of the countries in the first graph. Bizarre! See chart below. (Graphs here are all courtesyTrading Economics.)

(Source:Trading Economics)

Naturally, stalled productivity from 2016 to 2019 gave fuel to critics of the Morrison Government that it was failing. They already had plenty of other ammunition, with the economy suffering more than 60 all-timeworst outcomes.

Since the change of government in May 2022, productivity has again slumped alarmingly, as the graph reveals. This has provoked condemnation of Labor.

Albo and Dr Jim under sustained attack

Headlines published in recent weeks include:

• Worst productivity in nations history: Labors economic management criticisedSky News, June 2025;

• Chalmers super tax will send productivity backwardsFinancial Review, 23 June 2025;

• Australias energy policies are driving down productivity and living standardsCanberra Daily, 25 June 2025;

• Stop profligate spending: Chalmers productivity roundtable shows he is desperate for moneyThe Herald Sun, June 2025; and

• Australia is trapped in a productivity death spiralMacroeconomics, 1 May 2025.

Some of these are constructive essays, while others are diatribes from partisan nutters. All assume Australias current experience is aberrant and undesirable.

Despite global headwinds, Labors steady hand is quietly steering the Budget toward a decade of repair and resilience.

Indicators that all is well

In fact, Australias economy is booming. Never before since records have been kept hasinflationbeen below 3% and thejoblessrate below 4.2% for ten months straight.Spendingon dining out, cosmetics, jewellery and other luxuries is at an all-time high. Sales ofhouses, newcarsand privateaircraftkeep setting records.

Australia is now the worlds only economy with its jobless rate below 5%, and medianwealthper person above $400,000. It is the only economy with triple-A creditratings, inflationbelow 2.4%, and continual GDPgrowthfor the last three years.

Such a profile is improbable if productivity had fallen off a cliff nine years ago. It is more likely Australians are just as productive, but the formula no longer reflects this.

Experience abroad

Adding weight to this thesis is observing that several comparable economies share Australias peculiar productivity trajectory. These include France, Canada, the United Kingdom and Italy. See blue chart, below.

(Source:Trading Economics)

In all five of these economies, productivity flatlined from 2016 to 2019, spiked during COVID, then declined after 2022. Graphs for New Zealand, the Netherlands, Belgium, Germany, Luxembourg and Greece are similar.

Economies whose productivity did not flatline before COVID but did fall dramatically after 2022 include Austria, Estonia, the Czech Republic and Lithuania.

Making sense of the chaos

So it is pretty clear the pre-2016 era of near-universal straight line increases is over and whatever ails Australia is at work elsewhere.

One theory is that substantial productive work has shifted into private homes since 2016, particularly after COVID where it is not so readily measured.

Australias National Disability Insurance Scheme (NDIS) has enabled millions of hours of highly valuable home care for patients with illnesses and people with disabilities. If no money changes hands, the Stats Bureau may not record this.

The March quarter national accounts confirm the Albanese Government is achieving its economic goals.

The same could well be happening with Britains National Health Service (NHS), Canadashealthcaresystem and equivalent schemes elsewhere.

Other non-salaried occupations include home schooling, childcare, home-stays and some home-based businesses in the service sector. These are all productive and often highly remunerative but not always reflected in the data.

The way forward

A clue to the plausibility of this theory appeared in the national accountspublishedin early June. The ABS advises it will commence publishing estimates of labour productivity for the total non-market sector in the June quarter 2025 publication. This is due in September.

(Source:ABS)

Meanwhile, Treasurer Chalmers has called aroundtablefor August, which will hear a range of views. Hisconsultationprocess welcomes public submissions via theTreasury website.

Lets see if they receive input from economists who have studied the global situation in some depth.

Then lets hope the process is productive.

The economy is a dominant issue in the Election. From now until polling day, Independent Australia will outline some key facts on the economy that put the kybosh on many of the myths, lies and distortions being peddled in the election campaign.

Alan Austinis an Independent Australia columnist and freelance journalist. You can follow him@alanaustin001.

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