2CC Breakfast

Subjects: Australia's productivity growth, Wayne Swan's speech.

Transcript, E&OE

1 August 2012

MARK PARTON: We're joined on a Wednesday morning by the Federal Trade Minister Dr Craig Emerson. He's on the line right now. G'day.

CRAIG EMERSON: G'day, Parto, and happy birthday to all horses.

PARTON: Yeah, well I know we get a lot of horses that listen to the program, Craig, so that message will get straight through to them.

EMERSON: A horse is a horse, of course, of course.

PARTON: It is indeed. But turning from horses to productivity, I was really surprised with these facts and figures that have come out concerning productivity: that Australia's been ranked second worst of 51 countries for productivity growth. This is according to a global survey that places the nation's economic performance behind 33 countries, including New Zealand and Colombia. What's going on?

EMERSON: I've been tracking productivity growth all through the last decade and the early parts of this decade. It started slowing in the year 2000 after a productivity boom in the late-1990s, built on the Hawke-Keating economic reforms. It kept sliding away to the point where by one measure it turned negative in 2006. Now, in the last year or so there has been a lift in productivity growth in Australia, but these figures are notoriously irregular — up and down — so I'm not going to put too much store in that. But there does seem to be the early evidence of a pick-up in productivity growth.

PARTON: I know that there's a bunch of people including, for argument's sake, the Australian Human Resources Institute, who are tracing this back to the Fair Work Act.

EMERSON: That's not right, in my view. I don't think that the Fair Work Act has had a lot to do with productivity growth one way or the other. I know that there are arguments now that we should return to some sort of variation of WorkChoices in order to lift productivity growth. Productivity growth in Australia is about working smarter, not working harder.

PARTON: But Craig, how could you possibly say that the return to the Fair Work Act has got nothing to do with the loss of productivity. Of course it … it must.

EMERSON: If you're arguing that productivity growth was boosted by WorkChoices, you're arguing against the figures; fundamentally arguing against the figures. Productivity growth fell during the period of WorkChoices. I'm being generous and saying I don't think that WorkChoices itself stifled productivity growth. It certainly didn't lift it, because it turned negative in 2006, Parto. Multifactor productivity growth turned negative in 2006. And that's when WorkChoices was in full swing.

PARTON: Okay.

EMERSON: So if we're going to link productivity growth to that industrial relations legislation, you'd have to say the evidence is that it had a damaging effect on productivity growth. But in truth it's really about investing in education, about investing in infrastructure. And the truth again is, mate, that there was a boom in productivity growth, but the previous Government didn't make the necessary investments. We are. It does involve a lag. Productivity growth is starting to show an upturn. I'm not going to put too much faith in that at this stage because it's one year, but the signs are positive.

PARTON: We'll continue to monitor that, as I'm sure you will. I know you can't speak on behalf of your friend Wayne Swan, but I know he's speaking tonight and warning that Australia shouldn't follow the US down the road of extreme income inequality, launching a fresh attack on the mining billionaires Gina Rinehart, Andrew Forrest and Clive Palmer. What is he doing: is he trying to win votes from the 'Occupy' crowd?

EMERSON: There is a real problem with the model, if you like. In the United States the figures are something like this: something like 20 years ago the top 1 per cent of people held 9 per cent of the wealth. Now the top 1 per cent holds 23 per cent of the wealth. And even that might be manageable if everyone was moving forward, but the proportion of people on very low incomes is rising, and their incomes are falling. The United States is sort of the bastion of the market system, of the capitalist system. These are very worrying developments. And I join Wayne in saying that we've got to make sure that the Australian model is never replicating the US model, because the way that things are going in the US in terms of income inequalities is very disturbing.

PARTON: If Gina Rinehart, Andrew Forrest and Clive Palmer hadn't come along, this country wouldn't be quite where it is now, though, would it?

EMERSON: I'm a fundamental believer in wealth creation, but at the same time it's not so much a matter of redistributing wealth but redistributing opportunity, making sure every young person has an opportunity of a great education. That's what we're doing with this model, based on the Gonski report, of needs-based funding. It's to open up doors and a good future for all young people, irrespective of their incomes. I think fundamentally, mate, that is the Australian way. I think Australians value the sense of fairness in this country. And that's what Wayne's saying: let's hold onto that sense of fairness; obviously, let's share the benefits of the mining boom so that it's not just a few who get those benefits but they are spread, and particularly spread in terms of increasing opportunity, not just redistributing wealth.

PARTON: Good luck with the class war, and thanks for chatting this morning.

EMERSON: Thanks, Parto. Bye now.

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