Entrepreneurs are the key to boosting productivity, according to a research paper from the Institute of Public Affairs, but are held back by excessive regulation and taxes.
The paper, by IPA senior fellow and RMIT University professor Sinclair Davidson, and RMIT senior lecturer Ashton De Silva, is titled Does Australia have a Productivity Growth Problem?
According to the authors, productivity growth has fallen to its lowest levels since the 1980s, but “there is little active intervention that government can undertake to improve that situation”.
Rather than relying on the government to boost productivity, the authors argue “long-run growth is an entrepreneurial activity”.
“There is little that government can do to foster entrepreneurship beyond providing an appropriate environment,” the authors wrote.
The IPA identifies three ways in which it claims entrepreneurs are being held back:
1. Government reform
Stalled industrial relations reform is often canvassed as a cause of the productivity slowdown, but “nobody can tell if there is a strong link between productivity and industrial relations”.
“One could as easily attribute the big fall to the huge increase in government handouts and bureaucracy since the early 2000s,” Davidson said.
2. Obsolete qualifications
“On-the-job training is far more important [nowadays],” Davidson said.
“Overseas studies shown foreign companies can train up unskilled labour to world-class standards, making a mockery of the relentless drive for university degrees.”
Fred Hilmer, vice-chancellor of the University of NSW, told The Australian removing barriers to competition is crucial to reviving Australia’s declining productivity, such as allowing universities to compete on price as well as student numbers.
3. Red tape and tax
The IPA paper argues Australia already has the core institutions of reliable contracts, political stability and the rule of law to promote a productive society.
Beyond that, “reducing the number of regulations and cutting taxes are the two best ways to encourage entrepreneurship and competition”.