Gillard pinpoints productivity gap

Many political analysts have commented that Julia Gillard has looked particularly prime ministerial since announcing her Government’s flood levy, a reasonable if unnecessary response to Queensland’s disaster.

She has passionately defended the idea (most notably in that fiery interview with Neil Mitchell) and given plenty back to the Opposition by reminding the public that Howard proposed six levies while he was in power.

Yesterday she took on another big picture issue in a speech at CEDA, taking up a theme that I’ve looked at a few times, namely – what happens after the resources boom?

Gillard looked at a number of the challenges the boom is creating, but at the top of her list is skill shortages.

“After three decades when unemployment was our major problem, we now face shortages of labour – a problem unmatched anywhere in the industrialised world.”

Gillard’s speech was designed to establish a new Government target – to get the 800,000 people who are underemployed working more, and to get the 800,000 not working back into the labour force.

It’s a fine and worthwhile goal and its importance was underlined by a report released yesterday by economists Saul Eslake and Marcus Walsh from the Grattan Institute, entitled Australia’s Productivity Challenge.

The report delivers a worrying message about life after the resource boom ends.

“Australia’s rate of productivity growth accelerated dramatically during the 1990s, playing a vital role in lifting Australia’s macro-economic performance, and Australian standards of living, during that decade and since,” Eslake and Walsh says.

“There has been a no less dramatic deterioration in Australia’s productivity performance over the past decade, with the broadest measure of productivity growth actually having turned negative over the past five years.”

“Australia’s economic prospects beyond the end of the current ‘resources boom’ will deteriorate significantly (as they did in the 1970s and 1980s) if the decline is our productivity growth performance is not reversed.”

The question now is, how do we get those 1.6 million unemployed and underemployed workers to make a bigger contribution?

Yesterday, Gillard went through a list of things the Government had done, including tax cuts for low income earners, training subsidies and incentives (particularly focused on the young) and family benefits to help workers juggling parenting duties.

She also said she would “continue to take steps to improve the incentives for such potential workers to rejoin the labour market”.

Sounds good, but let’s leave no idea unexamined in this process.

As well as looking at measures to engage younger workers, we need to examine ways to keep older workers in the labour force for longer.

Could we look at measures to help people work from home, particularly if they have a disability or other issues?

How do we re-skill workers already engaged in work, be it part-time or casual? What role can employers play in this?

How do we smooth the path from education to work?

Gillard’s challenge is a big one, but it’s crucial. Let’s hope it doesn’t just fade into the background after this one speech, because we’ve got to get this right.