Australia’s economic productivity has been in freefall over the past two years. Since the beginning of 2023, our ability to produce things has fallen by 5 per cent. There has never been a reduction like this in recorded history.
The closest parallel was a 3.5 per cent reduction in the mid-1980s when Paul Keating warned us all that we could turn into a banana republic.
As Nobel Prize-winning economist Paul Krugman once said, “Productivity isn’t everything, but, in the long run, it is almost everything.” That is because it is productivity that determines how much we can pay workers, how much taxes we raise for public services and how much we all must work to get by.
If Australia has any hope to recover from the historic fall in our living standards over the past two years, it must start with a focus on lifting our productivity.
In contrast to Australia, productivity in the United States has been growing by 2.7 per cent over the past two years.
In the United States, energy production has hit record levels. In 2023, the US produced more oil than in any country, in any year, ever. As a result, energy prices in the United States are less than half what they are here.
Compare that to Australia where the Prime Minister announced that our aluminium smelters would need a $2 billion taxpayer-funded bailout to save them from the consequences of “cheap” renewable energy.
If renewable energy is so cheap why do companies using it need a government subsidy when they previously did the same things for free?
This outcome directly reduces our productivity because it is now taking more resources (including the taxpayer funding) to produce the same thing (aluminium) as we did before.
The economic performance gap between Australia and the US has already been growing but President Donald Trump’s actions this week will make that gap wider than the Grand Canyon. Trump’s actions to cut red tape, reduce wasteful government spending and get the US out of the Paris climate change agreement will supercharge the US economy. Already businesses are jumping over themselves to invest in the US and that leaves less capital for us.
Lots of people have opinions on whether what Trump is doing is right or wrong. But getting hung up on these, as an Australian, is like a sailor complaining about the sea. Whatever our views, we are going to have to live with Trump and the more interesting question is what we do in response.
Australia now faces another banana republic moment. If we stay mired in our mining boom complacency we risk entering into a period of economic pain that Australians have not experienced for a generation. The falling Australian dollar is an early warning that we are skating on economic thin ice.
The good news is that we are an amazing country with tremendous natural resources. Thanks to this natural endowment we have the potential to take our own destiny in our own hands. We just have to rekindle the pioneering spirit of our ancestors.
I notice this Australia Day there is much less crying about our past. Polls are now showing an increase in support for Australia Day to stay where it is.
This Australia Day think about what life must have been like for Margaret Catchpole who arrived in Sydney on 14 December 1801 having been sentenced for transportation for life for horse stealing. Margaret worked hard, won a pardon from Governor Macquarie and spent her remaining free life running a small shop and as a midwife.
People like Margaret helped build our modern Australia from a harsh wilderness to one of the most prosperous countries in the world.
We have so many more natural advantages than Margaret had, and there is no reason we can not do just as amazing things in the future than we have done in our past. Every shopkeeper, midwife and thousands of other Australians are doing that everyday.
We just need political leaders with the same courage.
The courage to cut back on ridiculous red tape, like that produced by the Workplace Gender and Equality Agency who make Australian businesses spend their lives filling out government forms rather than producing better products for their customers.
The courage to end the wasteful spending on the green subsidy train that is pushing up our energy prices and destroying Australian manufacturing.
The courage to get us out of ruinous international agreements like the Paris Agreement which makes Australia become poorer while the United States, China, India and Indonesia build more coal fired power stations and oilfields.
Australians have had a tough few years but we will emerge from this time providing we rediscover the Australian values of telling it how it is and valuing action over more talk about Trump or whatever the latest fad is.
