Last week’s strong jobs figures for September — unemployment revised down to 4.1%, record participation and record hours worked — had champagne corks popping among inflation hawks who assumed they killed off any chance of an interest rate cut this year. But they also mean Australia’s productivity performance is about to decline still further.
That’s because what economists call “productivity” isn’t anything much to do with what you and I think of when we use the word. Instead it means gross domestic product per hour worked — or, preferably, gross value added in the market sector of the economy per hour worked. That means that if hours worked go up and GDP doesn’t go up as well, then productivity declines. And GDP might not go up for all sorts of reasons unrelated to productivity — there might be a decline in our terms of trade, or government spending might fall, or households might cut back on spending, or businesses might cut back in investing.
This will translate into a comparatively lower increase in GDP and bingo — headlines about a “productivity crisis” in the Financial Review and demands from business for industrial relations laws to be “fixed” to enable them to exploit workers more effectively be more flexible.
And the biggest thing stopping GDP from growing at the moment is the Reserve Bank’s punitive monetary policy stance and the pressure it is putting on households and small business. That’s been a key reason for our poor productivity performance since the pandemic ended and will likely be the biggest reason why productivity in the current quarter is poor — regardless of how hard or how smart we all worked.
It’s just one of the areas where the alleged “productivity debate” is marked by bad faith and wilful misinterpretation by people hostile to workers and ordinary households in business, politics, economics and the media. We discussed another recently: the efficiency of our health system, which has been derided as a productivity black hole, except that it turns out that it’s one of the world’s most productive, and one of the world’s best in terms of health outcomes.
The federal opposition joined in the attacks on the health and caring sector last week, when Invisible Man Angus Taylor — cheered on by the Financial Review — emerged from hiding to attack the fact that “the majority of jobs growth is coming from the non-market sector, meanwhile, market sectors are experiencing skill shortages … this has resulted in productivity across the economy going backwards by 0.2% each year. There has been no productivity growth in the care economy for 20 years but at the same time, it is driving a reallocation of workers from other sectors.”
Frontbench colleague Michaelia “Chuckles” Cash joined in to try to undermine the strength of the labour market by arguing the growth in the health and caring sector was “just the government increasing the size of the bureaucracy. The Albanese government is all about increasing the size of the public sector” This assessment was even dumber than most of Cash’s contributions to public debate. The health and caring sector has added over 220,000 jobs since the Coalition was dumped from office — compared to 70,000 bureaucrat jobs, at federal, state and local government level. Or is it that Cash can’t tell the difference between a nurse, or an aged care worker, or a police officer, and a pencil-pusher?
But if Taylor and Cash have a problem with the care economy, and think growing employment in health, disability care, aged care and childcare is such a drain on the economy, the solution is pretty simple: tell us how many doctors, nurses, disability care providers, aged care workers and childcare workers you will cut when you’re elected. They’ll control the purse strings of most of those areas if they’re back in charge, so they’ll be in a position to end the great productivity drain that is the health and caring economy.
True, this would run dead against what the Coalition did when it was last in office — health and social care employment grew by nearly 900,000 over the three terms of the Coalition from 2013, as it ramped up spending on health, and on the NDIS (dramatically so) and on home care for seniors, and in childcare. But Taylor and Cash seem convinced that all of that was a bad idea — or, at least, it’s a bad idea when Labor does exactly the same thing.
So, let’s have it from the Coalition, and their cheerleaders at the AFR: how many health and care workers should be cut? How much longer should patients wait for surgery? How much worse should the conditions be for our seniors in residential aged care? Just how many toddlers can one childcare worker look after at once? How much should we pare back services to disabled Australians? We’re all ears.
