Productivity blame game gets us nowhere

As the manufacturing industry stares into the abyss, retail keeps getting whacked and tourism struggles, the sniping between both sides of the political divide about who is to blame keeps growing.

This morning Australian Council of Trade Unions president Ged Kearney attacked Reserve Bank of Australian governor Glenn Stevens for being “out of touch” and “captive to the big end of town” after he told a Senate Estimates hearing that business leaders have been telling him the Labor Government’s Fair Work Act was not providing the necessary flexibility to boost the nation’s productivity.

Kearney’s comments sparked a swift retaliation from former Australian Building and Construction Commission head John Lloyd, who also slammed the ACTU for being “out of touch”.

“Improved productivity is essential to ensuring increases in wages in the future are sustainable,” he told The Australian.

It’s not a great sign that productivity appears to have become a political football – which will almost guarantee the situation does not get the detailed attention it deserves.

I think the battle over whether the Fair Work Act is responsible for the drop in productivity is a real red herring.

As well-respected economist Saul Eslake argued last week in a paper entitled Productivity – The Lost Decade, this is a problem that has been brewing since the middle of the 1990s.

Which suggests productivity was falling under both the Howard Government’s WorkChoices regime (which put a huge amount of emphasis on employers and employees bargaining individually) and under the Rudd/Gillard Government’s Fair Work regime (which has swung the pendulum back towards collective bargaining).

So let’s get the blame-game out of the way – this is everyone’s fault and we all need to play a role in fixing the problem.

And every solution needs to be on the table. Despite the ACTU’s protestations, Glenn Stevens was right when he said that the industrial relations regime may need to be looked at – although I am not sure anyone wants to see another set of big changes to the laws.

We need to look closely at reducing red tape to drive down business costs.

We need to look at what infrastructure deserves investment.

We need to keep examining tax reform, to encourage maximum workforce participation and prevent businesses and households acting just to get a tax break.

Perhaps most importantly, we need to keep investing in skills and training and looking for ways to improve our performance in the area of innovation.

All this stuff needs to be on the table – and cheap sniping needs to be taken off it.