Urgent action is needed to lift workforce participation and productivity if Australia’s economy is to maintain a growth rate above 3%, according to a new landmark report by the Australian Industry Group.
Australia’s economy has grown at a strong 3.25% on average over the past five years, but a slower pace of productivity improvement and lower workforce participation means the economy will only grow at 2.9% a year over the next decade on current trends.
While that would still see an additional $37 billion a year in wealth generated by the economy, it would still mean tougher conditions for business, particularly as benefits from the resources boom begin to decline.
The challenge for government and the private sector is to start working now to improve infrastructure and inject more skilled employees into the workforce, according to Ai Group chief executive Heather Ridout.
“For the private sector to deliver, the environment has to be there and that requires Government action on infrastructure such as broadband, on the skills agenda and on how the Commonwealth and the states work together,” Ridout says.
On workforce participation, the report rejects the view that Australia has already come close to exhausting the pool of available skilled labour.
“There are groups we need to do better on as the population ages – the over 55s are starting to engage more and that needs to continue, and more training could see people on disability pensions come back, and there is a need to engage more working age women,” Ridout says.
Ridout says the health of the manufacturing sector will be a key litmus test for whether we are achieving substantial improvements in productivity in the years ahead.
“Manufacturers are facing tough domestic and global competition, the high dollar is making it harder and they are labouring under the skills shortage, so they are really at the sharp end of these issues,” she says.
For more on how to prosper in slower economic times, check out SmartCompany’s story on Life in the Slow Lane.