Australia’s Next Productivity Gamble
In Canberra’s airless committee rooms, officials are whispering about the “Hilmer moment” of the 2020s. That was the landmark competition reform package of the mid-1990s, born of bipartisan grit and bureaucratic sweat, which helped give Australia its best decade of productivity growth in living memory. Today, in the lead-up to an Economic Reform Roundtable convened for 19–21 August, Treasurer Jim Chalmers wants to recapture that spirit. Productivity—the unglamorous arithmetic of output per hour—has slipped from the centre of politics for two decades. Now it is back in fashion, not because of some sudden epiphany, but because the numbers are sobering: the Reserve Bank has trimmed its long-term productivity growth outlook from 1% to 0.7%, a downgrade that, compounded over decades, would leave Australians tens of thousands of dollars poorer.
The government’s second-term productivity agenda is an eclectic but deliberate list. There is a $900 million National Productivity Fund to coax states into regulatory surgery, a new ban on non-compete clauses to loosen up the labour market, and a national trades-licensing scheme to let electricians, plumbers and others work freely across state borders. A “single front door” for approvals aims to cut the time it takes to get large projects off the ground. The country’s patchwork of product standards will be aligned more quickly with international ones, so that imported goods needn’t languish in bureaucratic quarantine. And the long-running supermarket duopoly will be needled by planning-rule changes that make it easier for rivals to get a foothold.
Alongside these micro-reforms sits a push into digital transformation—a national digital identity scheme, a “right to repair” for consumers and farmers, and an AI adoption strategy that aims not merely to police algorithms but to exploit them. That means infrastructure, from quantum computing to a bigger, better NBN, and rules to open up payment systems to fintech. Health and aged-care reform is also framed in productivity terms: raising output without degrading service. The NDIS and aged-care budgets are to be reined in by cutting waste and fraud, while preventive health is to be prioritised to keep expensive illnesses at bay.
It is a sprawling agenda, with five pillars—competition, net-zero transformation, skills, digital technology, and efficient care—meant to run in parallel. Chalmers’ team insists the proposals are practical, budget-neutral or better, and in the national interest. They are also, crucially, meant to be collaborative: union leaders, business bosses and state treasurers will all have a seat at the table next week. The intent is to recreate the consensus politics that, once upon a time, made reform possible.
The long shadow of the 1980s
For those with long memories, the current exercise has a familiar air. Australia’s last great productivity leap was set in motion in the 1980s under Labor’s Bob Hawke and Paul Keating. Then, the economy was closed, coddled and in decline. The currency was fixed, the banking sector insulated, and industry swaddled in tariffs. Hawke and Keating tore through that architecture: the dollar was floated in 1983; financial markets were deregulated; tariffs were slashed in carefully phased rounds; and monopolies from airlines to telecommunications were opened to competition.
The most radical change came in industrial relations. Through the “Accord” with the unions, wage rises were restrained in exchange for better public services and tax cuts, later morphing into enterprise bargaining tied directly to productivity. The process was consensual enough to avoid Britain-style strikes, yet potent enough to drive a lasting shift towards flexibility and efficiency.
The capstone was the Hilmer Review of 1993, which under Keating became the National Competition Policy in 1995. This extended market principles into previously sheltered sectors—utilities, transport, even local government services—and created the Australian Competition and Consumer Commission to enforce them. States were bribed with competition payments to dismantle anti-competitive rules. The Productivity Commission reckons Hilmer’s package alone lifted GDP by 2.5% in the long run.
By the mid-1990s the economy had been rewired. Productivity surged in the late ’90s at over 2% a year—an unprecedented clip—fuelled by competition, new technology and better-skilled workers. Living standards rose quickly; unemployment fell. Crucially, much of this survived the change of government in 1996.
Consolidation, then overreach
John Howard’s Coalition inherited the reformist momentum and, for a while, kept it humming. His government pushed through the GST in 2000, replacing a tangle of inefficient taxes with a broad-based consumption tax. It finished much of the NCP work, privatised Telstra and other state assets, and signed a string of free-trade agreements. In industrial relations, Howard moved to individual contracts, then in 2005 to the ill-fated “WorkChoices” laws, which gutted union power and removed many worker protections. That overreach provoked a voter backlash and helped cost him office in 2007.
Even so, the Howard years ended with low debt, a long run of budget surpluses, and continued—if slowing—productivity growth. The mining boom complicated the picture: huge capital investment depressed measured productivity at first, but promised big gains once projects came online.
The reform pause
Kevin Rudd and Julia Gillard’s Labor governments in the late 2000s and early 2010s faced the global financial crisis and then a peak-and-fall in mining investment. They spent political capital on an “education revolution”, a national broadband network and the NDIS. Gillard’s short-lived carbon price, and Rudd’s mining tax, were both swiftly undone by successors. Regulatory reviews like the Harper competition review (2015) produced sensible ideas—looser planning rules, deregulated pharmacies—but most gathered dust.
Through the 2010s, prime ministers came and went; grand reforms were thin on the ground. Turnbull’s “ideas boom” for innovation fizzled. Infrastructure spending rose, but so did congestion. By the end of the decade, the Productivity Commission was warning that dynamism was ebbing: business entry rates were down, market concentration up, and labour productivity growth barely half its 1990s pace. COVID-19 spurred a burst of forced innovation—telehealth, remote work—but not a coherent productivity push.
The anatomy of growth
Productivity is a slippery thing, driven by forces both within and beyond Canberra’s reach. Demand and investment matter: robust markets encourage firms to buy new kit, adopt new processes and train workers. The labour force matters: education, skills, migration flows and the match between people and jobs all determine how effectively capital is used. Infrastructure matters: clogged ports or creaky broadband drag everyone down. Technology matters: economies that quickly diffuse new ideas from frontier firms to laggards tend to grow faster. And politics matters: big reforms require political cover, often bipartisan, and institutions to keep them on track.
Australia’s history bears this out. The 1980s–90s boom in productivity came when most of these stars aligned: fresh technology (IT, mobile telephony), bold deregulation, a skilled and adaptable workforce, and political leaders willing to explain hard choices. By contrast, the 2010s had slower tech diffusion, a services-heavy jobs shift into low-productivity care sectors, weaker competition and little appetite for reform.
Back to the future?
That is the context for Chalmers’ agenda. It borrows liberally from past playbooks—competition payments to states, regulatory pruning, skills reform—and updates them for the digital age. It casts the care economy, long seen as a cost centre, as a productivity frontier. It treats climate and energy transition as infrastructure projects to lower future costs. And it wraps it all in a process designed to look—and feel—collaborative.
Sceptics will note that many of the ideas are incremental. Banning non-competes is good for job-hopping software engineers, but hardly a panacea. National licensing for electricians will not, by itself, lift multifactor productivity out of its funk. The risk is that, absent the shock of a crisis or the binding glue of a cross-party accord, the agenda dribbles into worthy but modest tinkering.
Yet history also suggests that steady, compounding reform—if sustained—can work wonders. Tariff cuts in the 1980s were barely felt at first, then reshaped entire industries. The GST was derided in its early years, then quietly became a workhorse of the tax system. The Hilmer reforms took years to filter through, but lifted GDP per head for decades.
Australia has been here before: a government convening leaders, clutching reports from the Productivity Commission, trying to summon a spirit of common purpose. Whether Chalmers can channel Hawke and Keating—or even Howard in his more pragmatic phase—will determine if the 2020s become another productivity decade or a lost one. The stakes are not abstract. As the Treasurer has warned, the difference between 1.2% productivity growth and 0.8% is more than $10,000 per person after 40 years. In the compounding game of productivity, the arithmetic is merciless, but the rewards, if you get it right, are rich.