Shift in reform expectations required

Productivity Commission, Chair, Peter Harris AO told CEDA's State of the Nation 2013 it's time to alter Australia's national expectations of reform.

"We need to find a model for continuous productivity-oriented reform to start to replace those affects that are driven by the…terms of trade affect with genuine productivity shifts," he said.

Mr Harris said Australia had been good at managing crisis but "the too-late policy response" being used was not the way forward.

"Ultimately we've been good in crisis but it's no way to run a railroad," he said.

"It would be so much better to address this earlier at a time, like the time we're in now, when we're capable of giving ourselves 12-18 months to design effective productivity enhancing policy reform."

"We do need a way to embed expectations in the national consciousness that without continuous reform the falling terms of trade means a downturn.

"All I want from governments is a commitment once a term to a major microeconomic reform statement.

"Unless we expect a very substantial population enhancement in the future, those changes in output are driven entirely pretty much, by our productivity."

ACTU, Secretary, Dave Oliver agreed productivity improvements are crucial but said the benefits of those improvements need to be distributed.

In the last decade productivity growth outstripped wages growth, he said.

"While the workers are contributing to greater productivity, they are not getting their share of the rewards," Mr Oliver said.

"In each of the past four financial years, the wages share of national income has been lower than at any time since the 1960s. The profits share, by contrast, is at record highs.

"We understand that improving productivity benefits everyone because it creates economic growth and wealth, and employment but it has to be a genuine and meaningful discussion based on the facts, not ideology.

"Permanently higher productivity will not be gained by cutting wages and conditions, or creating a more insecure workforce.

"That is a simplistic, lazy and ideological position that Australian Unions simply cannot accept."

PwC, Economic and Policy Office Managing Partner Canberra, Jeremy Thorpe, said the terms of trade had been the prop that sustained Australia's per capita income but the challenge now is getting productivity to increase as the terms of trade decline.

Compared to the US, Australia's productivity has been lagging, but more concerning is the lagging growth in comparison to some of the Asian economies, he said.

Mr Thorpe also said the productivity of government itself is often overlooked.

"When we're talking about productivity and were not talking about 26 per cent of our workforce, that's a bit of a problem," he said.