Analysis and Commentary

Treasurer opts for tinkering with mostly ignored Productivity Commission

Analysis and Commentary

By Peter Roberts

The Treasurer Jim Chalmers has opted for gradualist reform of the much criticised Productivity Commission, appointing a former Labor Party staffer to be the commission’s new chair.

Chalmers appointed Chris Barrett (pictured) as the new Chair and said ‘to build a stronger economy, we need to build stronger economic institutions – and that means renewing the PC’.

Barrett has almost three decades of experience in public policy, the majority as a senior public servant including as Australia’s Ambassador to the OECD and Executive Director of the European Climate Foundation.

He was also as chief of staff to former Federal Treasurer Wayne Swan, and senior adviser to opposition leader Kim Beazley.

Currently, he is Deputy Secretary of the Economic Division in the Victorian Department of Treasury and Finance.

Mr Barrett has a Master of Public Policy from Princeton University where he graduated first in his class, a Master of Arts from the University of Melbourne, and a Bachelor of Commerce from the University of Melbourne.

Barrett is no doubt an economist’s economist, but his appointment only increases the anxiety felt by many observers that the Albanese government is going to perpetuate the mistakes of previous Labor governments with another ineffectual ‘reform’ of the PC.

Once before, concerned at the PC’s remoteness from the real world of industry, Labor moved the commission from Canberra to Melbourne, but nothing changed in its mantra that Australia should invest in sectors where we have competitive advantage – read mining -rather than pursue the development of competitive advantages.

The PC’s prescriptions have given us the world’s least complex economy, totally dependent on the export of a handful of undifferentiated commodities, increasingly fragile and open to external shock.

Announcing the appointment Chalmers paid lip service to real reform of the PC.

He said: “We will now work with him on our PC reform agenda, which picks up the ideas and contributions gleaned from months of consultation on the best ways to renew, refocus and renovate this really important economic institution.”

“The Productivity Commission plays a key role in identifying the policy reforms that can drive economic growth, so a strong, effective and well‑led PC will be vital to Australia’s progress into the future.

“We see the Productivity Commission as one of Australia’s core economic institutions and we want to find ways to strengthen it further.

“The government is committed to finding ways to broaden and deepen the Commission’s work, exploring new avenues to fulfil its core mission of raising Australia’s productivity performance in a rapidly evolving global economy.”

Chalmers did not explain how this view squared with Australia’s dismal growth in productivity under the PC’s watch over the past two decades, largely due to declines in business dynamism and slowing rates of innovation.

The latest figures underline this – labour productivity improved by 0.95 percent year on year in March 2023, compared with a drop of 2.30 percent in the previous quarter.

According to the 2022 World Competitiveness Yearbook Australia dropped from number 20 to 41 in terms of workplace productivity.

Chalmers also claimed that the PC under former chair Michael Brennan ‘has featured prominently in the national conversation about Australia’s productivity’, delivering more than 20 reports to the government.

Well I defy anyone in industry to recall a single PC report that shaped their conversation about improving productivity, and I defy Chalmers himself to name this list of PC recommendations that have been widely debated or actually implemented and had a significant bearing on Australia’s productivity journey.

There aren’t any.

Mostly PC reports are reported superficially and then left to gather dust on some shelf. If they are being listened to the figures tell the story of why they shouldn’t be, and if they are not being listened to – well, what is the point?

Further reading:
Rescuing the Productivity Commission from itself – By Phillip Toner and Roy Green

Picture: Chris Barrett

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