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The Guardian
2 days ago
- Business
- The Guardian
What could Albanese do to improve productivity? Here is a short, non-exhaustive list
In his address last week at the National Press Club, the prime minister announced a 'productivity roundtable' in concert with the Productivity Commission's latest inquiry into the issue. I won't be at the round table, but I do have a few ideas. First off, remember that productivity is the amount you produce with the hours and equipment you have. Work better with what you have or (usually) get better equipment to do your work faster, and productivity increases. It is not about reducing the cost of producing things. Getting paid $10 less an hour to do the same amount of work does not increase productivity even if your employer is more profitable. Unfortunately, productivity is often confused with profit and so business groups argue the key is lower company tax. They claim this will increase investment in things that increase productivity (such as new equipment or new buildings and structures). The evidence, though, is pretty nonexistent. The massive 2017 Trump company tax cuts, for example, which cut the federal US company tax rate from as high as 35% to a flat rate of 21% did bugger all to spur investment: If the graph does not display click here Hopefully the Productivity Commission will heed the advice of the current productivity commissioner, Danielle Wood, who in 2018, wrote that cutting the company tax rate would 'see national incomes go backwards for six years'. And income is really what productivity is about – specifically workers' income and their living standards. In theory, the real value of how much you earn an hour should rise in line with productivity. In the 1990s this mostly happened, but from 2000 onwards workers have missed out: If the graph does not display click here So, when worrying about productivity, we must remember to ask who benefits. But what could the government do to improve productivity? Here is a short, non-exhaustive list. This year, the government will pay about $10bn in diesel fuel rebates to mining and transport companies and the agriculture sector. By 2028-29 it will be $13bn. Despite growing almost as fast as the NDIS, we never hear the government talk about needing to rein in the expense: If the graph does not display click here But the fuel tax credit not only encourages use of fossil fuels, it creates a disincentive to investment in more efficient, and productive new vehicles – such as electric trucks. Research and development is vital to produce new equipment and technology (such as electric trucks). But the Australian government spends much less on R&D than most other OECD governments: If the graph does not display click here The government in April extended the $20,000 instant asset write-off for small business. This was purely a political rather than economic decision. Rather than encourage investment in productivity enhancing equipment, it is mostly a tax rort to buy big utes. How do we know this? Well, last week the AFR's wealth reporter, in a column about avoiding paying tax, described the instant asset write-off as 'a favourite perk of small businesses and sole traders'. They ain't lying. What else is a bad productivity investment? Residential land. It adds bugger all. But Australians devote far too much capital to property – almost 2.5 times that of the US: If the graph does not display click here Our tax system encourages this with the 50% capital gains tax discount and negative gearing, while also reducing housing affordability. The Parliamentary Budget Office estimated that removing the tax discount and negative gearing on investment properties would raise about $13.35bn in 2025-26. Dental health hurts the economy and reduces productivity because workers avoid going to the dentist because of the cost and end up with chronic issues that reduce output. A public system would be much more productive because it would massively reduce the cost hurdle for workers. The PBO estimated that putting dental into Medicare would cost $13.7bn. Rather conveniently for us, that is essentially the same as removing the CGT discount and negative gearing. By the same token, we know health systems that are dependent on private health insurance, such as in the US, are unproductive because the resources devoted to them deliver worse outcomes than public health: If the graph does not display click here Australia's health system is generally well regarded, but a recent report noted that we faired quite poorly when it came to access to care. Private health insurance is not a productive industry – consider the hours and expense devoted to marketing that yields no extra benefit. The same goes for private schools and the fees people pay fees. A 2022 study found that private education does not improve a student's academic performance. More resources devoted to no better outcomes is the essence of poor productivity. Currently both are exempt from GST, which effectively incentivises people to spend money on them (as does allowing donations to build structures in private schools to be tax deductible). Including both within the GST would deliver revenue that could go to improving productive public schools and hospitals, while repairing the shrinking tax base of the GST. Best of all, because richer households spend more of their income on both private school and private health insurance, the tax would actually be progressive. If the graph does not display click here Controversial? Of course. Which is why a government would also want to announce something huge – like say dental in Medicare. Productivity is an ongoing issue, but the key is to always think about who benefits from changes, and that the solutions are not about increasing profits or offshoring labour or reducing workers' pay, but should always be about making people's lives better. Greg Jericho is a Guardian columnist and policy director at the Centre for Future Work
Yahoo
12-06-2025
- Automotive
- Yahoo
$13,296 blow for EV drivers as major incentive could soon be scrapped: 'Would not buy'
Generous tax subsidies for electric vehicles (EVs) could soon be phased out as the federal government tries to rein in spending. EV drivers have been able to save thousands of dollars thanks to Fringe Benefits Tax (FBT) exemptions and other incentives. Sydney resident Tom Gao told Yahoo Finance these tax breaks were the main reason he jumped on the EV bandwagon when he bought his first Tesla. Productivity Commissioner chairwoman Danielle Wood has indicated it could be on the chopping block to make way for cheaper initiatives. 'We have a whole range of policies at both federal and state level to try and reduce carbon emissions,' she said on the ABC's 7.30 programme. Tesla driver backs $13,000 cash boost for EV drivers as popular rebate under fire ATO, Centrelink warning over $100 million Powerball lottery win Aussie teen's job paying $300 per hour without a uni degree 'Each of those has sort of an implicit cost per tonne of abatement. Some of those we've said in the past are pretty high, things like fringe benefit tax subsidies for EVs.' The tax break was introduced by Anthony Albanese in 2022 and was designed to boost the number of EVs on Aussie roads. That has definitely been achieved. According to the Australian Automobile Association, there were 6,752 battery-powered electric vehicles (BEVs) sold in the first quarter of 2022. Fast-forward to the first quarter of 2024, there were 25,552 sold. BEV sales have dropped off since then as plug-in hybrids became more popular due to being the best of both worlds between a battery and internal combustion engine (ICE).You can deduct the cost of an electric vehicle if: The EV was worth less than $91,387 The car was bought with a novated lease A novated lease allows an employee to buy a new or used car and have their employer cover the cost of lease repayments to an agreed financial supplier. The employer makes the repayments to the leasing company out of the employee's pre-tax salary in a salary sacrifice arrangement, which reduces the employee's taxable income. For example, if a worker secured a $68,000 EV through a novated lease through their company, they could save around $13,296 thanks to the exemption. As many as 100,000 people have taken up the tax break so far, according to the National Automotive Leasing and Salary Packaging Association. "I would not be buying an EV if FBT exemption is removed," Goa told Yahoo Finance, who feared there would be a "significant drop in EV purchases" if it was scrapped. "If you look at uptake of EVs in countries like Norway, it's completely driven by government incentives," the Sydney driver said. "That's the case across the world." The government ended the FBT exemption for plug-in hybrids at the end of March this year. The Productivity Commission is currently reviewing the tax break ahead of a government summit in August. It's set to release a report on its findings before that meeting in a few months. Treasury had forecast the FBT exemption policy would only cost taxpayers $55 million in the 2024-25 financial year. But figures from the Institute of Public Accountants found it cost closer to $560 million per year. The Commission estimated in 2023 that the policy cost between $987 to $20,084 per tonne of carbon abatement. This means the government is spending that much money for every tonne of carbon emissions it has helped prevent. That reportedly makes it the most expensive climate policy on the government's balance sheet by a long shot. For comparison, the next most expensive policy at a federal level is the discounted excise for E10 petrol, which is $128 to 274 per tonne of carbon abatement, according to the Australian Financial Review. While Gao has enjoyed the benefits of the policy, even he admitted it was an "outrageously" generous handout and bordered on being "extremely fair" for ICE drivers. While the FBT exemption for EV drivers might get scrapped, the Commission could suggest allocating the money towards broader emissions reductions strategies. This could include expanding the carbon emissions cap to additional sectors like road transport and electricity. During the 2025 election campaign, Peter Dutton said the Coalition would axe the exemption if his party won. The promise sparked major concerns in the EV community, with Electric Vehicle Council CEO Julie Delvecchio saying she was "extremely disappointed and confused". 'The electric car discount has been helping thousands of workers finally afford to buy an electric vehicle. When Australians make the switch to an EV, they stand to save up to $3,000 per year on fuel and maintenance costs, but the biggest roadblock is the upfront cost," she said. "The FBT exemption has been helping to lower that barrier. "The Australians who're set to lose out most are those in outer suburbs, who have embraced the electric car discount in droves. "People living in the outer suburbs and regional communities — who typically drive longer distances — are finally able to access the savings that EVs offer, thanks to this discount." She said the exemption had been "highly effective" at getting more EVs on the road and getting rid of it could "stall progress toward cleaner, cheaper-to-run transport".
ABC News
11-06-2025
- Business
- ABC News
Tackling Australia's productivity problem
We have been talking about stalled productivity in Australia for some time. Now the prime minister has called for a summit in August to drive change - with a caveat that the government's industrial relations changes are not up for discussion. All parties agree that business investment needs to increase, but what does business get in return? Productivity Commission chair Danielle Wood says look to AI. 7.30's Sarah Ferguson interviews Danielle Wood.
The Age
22-05-2025
- Business
- The Age
Working less could be the answer to one of our biggest problems
Sure, a handful of individual geniuses helped bring these things to life, but a majority of workers are limited in their ability to do things more efficiently, often by the tools, rules and conditions they're forced to work with. One suggestion made by the productivity boffins in their latest push (triggered by Treasurer Jim Chalmers' request for reform recommendations) in the economy-wide brainstorm on how to overcome the productivity road block, is shaking up the way companies are taxed. Loading Specifically, the commission is looking at ways to prod businesses to invest more (something that has been lacking in Australia for quite a few years). Specifically, it will consider tax incentives for businesses to spend on things like better equipment, tools and technology – things which help workers to save time and produce more or better things without having to work harder. A barista, for example, who doesn't have to share a machine with their colleague, may be able to serve more coffees, and an accountant with access to better software provided by their company may be able to slash the time it takes to crunch numbers for their clients. Cutting the 30 per cent corporate tax rate (an option currently on the table according to Productivity Commission boss Danielle Wood), though, is probably not a good move unless there's a way to guarantee those big businesses won't just pocket the extra profit or pay it out to shareholders. While big businesses might be keen for such changes, they probably don't provide bang for our buck, and they come at a cost to the government's budget. It's probably also bad news if it gives big companies – which already dominate many sectors of the economy – more power, making it difficult for small and medium-sized businesses to challenge them and drive innovation. However, tax breaks for new investment which, in theory, should encourage firms to invest, seem less effective in Australia compared with many other countries, according to the Reserve Bank. While big businesses might be keen for such changes, they probably don't provide bang for our buck, and they come at a cost to the government's budget. This makes it more difficult to achieve some of the commission's other reform priorities such as improving school student outcomes and upskilling the workforce. The better-educated we are, and the more we're able to build on our skills, the better we become at doing things. Under-resourcing of schools has been a well-documented issue – and probably a key factor behind Australia's lagging performance academically. It's also something the government will struggle to improve if its budget is tight. Cutting red tape is another area of reform being examined by the commission. This is a good thing – especially when it comes to the net-zero transformation. It's clear that climate change and the increased prevalence of natural disasters will hamper our ability to work. And without making it easier for Australian businesses to transition to cleaner energy, we'll be left behind in the global shift, and fail to act on a hugely promising area of growth. Speeding up approvals for new energy infrastructure is a good example from the commission of how we can improve productivity. Instead of being bogged down by lengthy approval times, businesses can get on with investing in transformative projects aimed at harnessing some of our natural gifts: sunlight, wind, and other cleaner forms of energy. Loading And while they are just lofty aims for now, other focus areas including supporting government investment in preventing health problems (rather than waiting to treat them after they arise) and improving our uptake of digital technologies, should make us more productive by ensuring a healthy workforce and helping us harness the power of developments such as artificial intelligence. But these are all things we've known for some time. It's also about bosses and government departments listening to the lesser – but consequential – suggestions made by their employees. If you ask any worker what the most time-consuming and unnecessary parts of their job are, they'll almost always have an answer. Most teachers, for example, point to the growing and excessive administrative work they're required to do which reduces their ability to do what matters for students – and what will actually affect students' outcomes. Yet, at company and department level, there's usually little to no engagement with employees about what they think could be done better – and even when there is, a dismal amount is actually done about it. A key determinant of the Productivity Commission's success in improving productivity will be to compel top decision makers and bosses to act on all of these reform ideas. Paradoxically, legislating a shorter working week seems radical, but – as with the laws which brought in the eight-hour working day – could boost productivity. There have been multiple studies showing shorter work hours improve workers' wellbeing, focus and efficiency. Having less time to get things done often pushes us to lock in and get more done in a shorter amount of time. And if this isn't the case, shorter work hours will push bosses to implement the productivity-boosting changes required to support their workers to work more efficiently and improve productivity in the longer term.
Sydney Morning Herald
22-05-2025
- Business
- Sydney Morning Herald
Working less could be the answer to one of our biggest problems
Sure, a handful of individual geniuses helped bring these things to life, but a majority of workers are limited in their ability to do things more efficiently, often by the tools, rules and conditions they're forced to work with. One suggestion made by the productivity boffins in their latest push (triggered by Treasurer Jim Chalmers' request for reform recommendations) in the economy-wide brainstorm on how to overcome the productivity road block, is shaking up the way companies are taxed. Loading Specifically, the commission is looking at ways to prod businesses to invest more (something that has been lacking in Australia for quite a few years). Specifically, it will consider tax incentives for businesses to spend on things like better equipment, tools and technology – things which help workers to save time and produce more or better things without having to work harder. A barista, for example, who doesn't have to share a machine with their colleague, may be able to serve more coffees, and an accountant with access to better software provided by their company may be able to slash the time it takes to crunch numbers for their clients. Cutting the 30 per cent corporate tax rate (an option currently on the table according to Productivity Commission boss Danielle Wood), though, is probably not a good move unless there's a way to guarantee those big businesses won't just pocket the extra profit or pay it out to shareholders. While big businesses might be keen for such changes, they probably don't provide bang for our buck, and they come at a cost to the government's budget. It's probably also bad news if it gives big companies – which already dominate many sectors of the economy – more power, making it difficult for small and medium-sized businesses to challenge them and drive innovation. However, tax breaks for new investment which, in theory, should encourage firms to invest, seem less effective in Australia compared with many other countries, according to the Reserve Bank. While big businesses might be keen for such changes, they probably don't provide bang for our buck, and they come at a cost to the government's budget. This makes it more difficult to achieve some of the commission's other reform priorities such as improving school student outcomes and upskilling the workforce. The better-educated we are, and the more we're able to build on our skills, the better we become at doing things. Under-resourcing of schools has been a well-documented issue – and probably a key factor behind Australia's lagging performance academically. It's also something the government will struggle to improve if its budget is tight. Cutting red tape is another area of reform being examined by the commission. This is a good thing – especially when it comes to the net-zero transformation. It's clear that climate change and the increased prevalence of natural disasters will hamper our ability to work. And without making it easier for Australian businesses to transition to cleaner energy, we'll be left behind in the global shift, and fail to act on a hugely promising area of growth. Speeding up approvals for new energy infrastructure is a good example from the commission of how we can improve productivity. Instead of being bogged down by lengthy approval times, businesses can get on with investing in transformative projects aimed at harnessing some of our natural gifts: sunlight, wind, and other cleaner forms of energy. Loading And while they are just lofty aims for now, other focus areas including supporting government investment in preventing health problems (rather than waiting to treat them after they arise) and improving our uptake of digital technologies, should make us more productive by ensuring a healthy workforce and helping us harness the power of developments such as artificial intelligence. But these are all things we've known for some time. It's also about bosses and government departments listening to the lesser – but consequential – suggestions made by their employees. If you ask any worker what the most time-consuming and unnecessary parts of their job are, they'll almost always have an answer. Most teachers, for example, point to the growing and excessive administrative work they're required to do which reduces their ability to do what matters for students – and what will actually affect students' outcomes. Yet, at company and department level, there's usually little to no engagement with employees about what they think could be done better – and even when there is, a dismal amount is actually done about it. A key determinant of the Productivity Commission's success in improving productivity will be to compel top decision makers and bosses to act on all of these reform ideas. Paradoxically, legislating a shorter working week seems radical, but – as with the laws which brought in the eight-hour working day – could boost productivity. There have been multiple studies showing shorter work hours improve workers' wellbeing, focus and efficiency. Having less time to get things done often pushes us to lock in and get more done in a shorter amount of time. And if this isn't the case, shorter work hours will push bosses to implement the productivity-boosting changes required to support their workers to work more efficiently and improve productivity in the longer term.
