Up-skilling is the best way to boost productivity: leading economists

Industrial Relations Skills and workforce capability

Skills and workforce capability, Innovation and R&D promotion

Industrial Relations Skills and workforce capability

The notion that average productivity should be linked to material standards of living is intuitively appealing, especially if the focus is on labour productivity rather than the more esoteric measure of total factor productivity. Average labour productivity is measured as real GDP divided by total hours worked, where real GDP measures the total value of goods and services produced in the economy adjusted to remove the effects of inflation. What could be more straightforward? Well maybe not. A couple of examples illustrate the depth of the difficulties that undermine the use of the measure. I start with the example of productivity in the mining industry. Research I carried out with the Productivity Commission showed the boom in mineral prices at the start of this century was associated with sharply falling productivity. When prices are high, it's profitable to mine low-quality deposits of minerals even though output per hour worked is low. The material standard of living is nonetheless higher with workers getting higher wages, governments higher royalties, and companies higher profits. Why, because they are producing more valuable output, even though the quantity of output per worker is lower. In this case, it's the value of the output that matters as most of the output is exported so the higher price is a gain to Australia. A second example involves the expansion of the scope of the market, particularly into service areas that provide low-wage employment as with the gig economy and early childhood day care. Low wages mean companies can make a profit providing these services even when the output per hour worked is low. The average output per worker for the whole economy is dragged down by expanding the share of these services in aggregate GDP. There are further issues involved in how you measure output of these services. The number of children cared for ignores the quality of care, while the number of kilometres travelled in delivering a restaurant meal ignores the possibility of using a closer provider. Expansion of market activity shows up in a higher workforce participation rate, increased employment, and higher aggregate real GDP, but the impact on real GDP per hour worked is ambiguous. Even if the expansion of market activity leads to an increase in real GDP per hour worked, the impact on the quality of life is unclear. Replacing a public park with a housing estate increased aggregate GDP but may not increase the average quality of life across society. The market undervalues many things, including public amenity, social cohesion, art, culture, diversity, and the natural world. My basic point is that trying to capture the material standard of living in the single measure of average real GDP per hour worked is a fool's errand. There are technical problems with aggregating market values to reach a meaningful summary measure of real GDP per hour worked, as well as the more basic problem with valuing output solely by market prices. I have ticked boxes for 'industrial relations' and 'skills and workforce capabilities' as policies that would lead to improved productivity. For industrial relations, I have in mind regulations to improve wages and working conditions in the gig economy to reduce low productivity employment. Improving skills and workforce capabilities allows companies to produce enough output to pay high wages and still remain in business. High wages and high labour productivity go together, as is well illustrated in the mining industry.

Tax policy Innovation and R&D promotion Education reform

Education reform

Tax Policy for Innovation R&D Promotion and education: a resource rent tax to fund support for structural change, minerals processing and manufacturing and education reform. Education Reform: break the elitism whereby the income and wealth of parents is the best predictor of how well you do in school and beyond. Government funding and no fees for public and private schools.

Tax policy Skills and workforce capability Giving the Labor Government the courage to initiate reform.

Giving the Labor Government the courage to initiate reform. So far its record has been dismal.

The tax reforms needed have been well-documented elsewhere, again and again. The only problem is that the Labor Govt doesn't seem to have the courage to adopt them.

Industrial Relations Regulation Skills and workforce improvements

Skills and workforce improvements

Regulation Skills and workforce capability Tax policy Housing

Tax policy, housing

Tax policy, Competition policy

Australia has comparatively high corporate tax rates relative to peer countries, which limits incentives for both domestic and international companies to enter its markets, constraining business dynamism and productivity through both innovation and the reallocation of capital and labour. Effective competition policy development and enforcement, particularly in the digital age, complements such competition-driven productivity-enhancing processes by ensuring that entrenched firms cannot stifle potential competition in markets for products, services, and labour. The combination of (corporate) tax and competition policy, with a laser-like focus on creative destruction and productivity-enhancing growth, directly speaks to the lessons from the 2025 Nobel Laureates in economics. Australia, as an aggressive and efficient 'second mover' in the international market for new technologies, should adopt these lessons in its efforts to create a nimble, adaptive, and fiercely competitive economy for enhancing long-run growth and productivity.

Industrial Relations Tax policy

Tax policy Housing Maintaining strong democratic institutions

Maintaining strong democratic institutions

We need to ensure that rising economic pressure and a generational divide in access to housing do not undermine support for democratic institutions.

Skills and workforce capability Innovation and R&D promotion

Industry policy

We don't need a to-do list, we need a policy-actionable theory of growth. Neither Treasury nor the Productivity Commission have a theory of growth. How then can they know which policies to adopt in terms of likely pay-off? Pursuing Harberger triangles by, for example, getting rid of poor regulation, is a worthy endeavour, but runs into diminishing returns, as we keep finding. A good starting point would be to dig deep into endogenous growth theory, especially the work of Paul Romer, Phillipe Aghion and Peter Howitt, all recent winners of the Nobel Prize in Economics.

Competition policy Skills and workforce capability Industry policy

Skills and workforce capability Industrial Relations

Focus on enhancing skills of current population rather than relying on the assumed skills of migrants.

Skills and workforce capability Regulation Primary and secondary education to enable more entrepreneurship

Primary and secondary education to enable more entrepreneurship, a cultural shift.

The straight forward policy tools are skills and workforce capability. What is often missing is a focus on earlier education that can influence culture - entrepreneurship and curiosity of Australians. As an overseas born Australian economist, I often think that attitudes to innovation are often lacking, we lack trust in our innovative capacity yet focus on our extractive industries. Major Productivity growth happens in other sectors of the economy and requires a shift in attitudes.

Competition policy Regulation Non-market productivity

Non-market productivity, which is hard to measure and so is often ignored

Market concentration is increasing, such that oligopoly rents and land rents are becoming a larger share of the economy. Therefore, competition policy needs revamping, which is on the federal government's agenda. Excessive regulation at the three levels of government is slowing approval processes, which is reducing the returns to investment in competition-enhancing projects and in housing. The reforms of the period 2008-2013 under the banner of A Seamless National Economy need revisiting and expanding under the new banner of A Single National Market. Since the 1950s there has been a dramatic increase in the service economy as a share of the national economy. The difficulty of measuring the productivity of services - especially non-market services such as health, education, policing, firefighting and defence, should not mean we don't need to increase productivity in these industries. The digitisation of health services is a good example, as are rehabilitation in the home for hip and knee replacements and My Home Hospital, which is prevalent in South Australia. The use of AI to assist in diagnostics such as X-rays and MRIs can dramatically increase the accuracy of diagnoses, but this will not show up in productivity statistics. Productivity increases can show up in healthier and longer lives. Isn't that the purpose of economic policy?

Skills and workforce capability Regulation

I selected "Regulation" above with the understanding that action in "regulation" could include "dere

I selected "Regulation" above with the understanding that action in "regulation" could include "deregulation", which is the thing I would advocate for. In this and other ways, I think the government needs to downsize and get out of the way of Australia's potential productivity growth. We also need to seriously address the huge technological and mental health challenges facing our young people (e.g., social media addiction does not a happy or productive worker make), and re-think educational curricula and system design such that people learn useful best guesses at truth, the capacity to think critically, and real personal development rather than ideological indoctrination and surface-level coverage of complex issues passed off as education. Here is a sketch of the problems of government overreach: https://brownstone.org/articles/how-to-cut-through-the-new-gordian-knots/ And here is a sketch of what i think is wrong in higher education: https://brownstone.org/articles/structural-reasons-why-todays-universities-fail/ And here is what I think should be done in higher education: https://brownstone.org/articles/what-must-modern-top-flight-education-look-like/

Skills and workforce capability Innovation and R&D promotion

All seven, and more, are important. Productivity depends on the complementary interactions of a large number of factors. High quality land, labour, capital and other inputs, and advanced technology, provide the basic inputs of production. The efficient and productive allocation of these inputs between products and between production methods depend on competitive markets supported by government provided and monitored property rights and a financial system. Government regulations, taxes and subsidies, and expenditures correct market failures and increase national productivity, for example public goods, external benefits and costs, and natural and other market power. Changes over time in technology, consumer tastes and international trade opportunities generate on-going reasons to change product mixes and production methods to sustain and increase productivity.

Innovation and R&D promotion Skills and workforce capability

Policies that support startups and help firms scale up would stimulate innovation, competition, and job creation, driving productivity growth across sectors. Equally important is the promotion of evidence-based policymaking. Australian firms and policymakers often exhibit excessive risk aversion, which can limit the adoption of innovative ideas and new approaches. Expanding the use of rigorous evaluation and experimental methods?for instance, through pilot programs, randomized trials, and data-driven assessments?would help identify which interventions most effectively enhance productivity. Additionally, improving labor force participation among women, older workers, and underrepresented groups would broaden the country?s talent base and strengthen aggregate productivity. Removing barriers to participation?through flexible work arrangements, affordable childcare, reskilling initiatives, and inclusive workplace practices?can ensure that Australia makes full use of its human capital.

Tax policy Innovation and R&D promotion

Housing Competition policy Mental Health

Mental health policy should also be considered. Poor mental health significantly increases presentee

Mental health policy should also be considered. Poor mental health significantly increases presenteeism and absenteeism, and reduces labour force participation. Expanding access to evidence-based programs, especially for young adults, where mental health problems and productivity returns are high, could be especially beneficial. Greater competition helps the spread of better technologies and management practices. Poor performing firms either improve or exit, allowing resources to move to more productive uses. Better housing accessibility and affordability helps people move to where they can be most productive.

Regulation Industrial Relations Tax Policy

Tax policy

Skills and workforce capability Innovation and R&D promotion

As Nobel Prize winners, Acemoglu and Johnson, make clear, technological progress inspired by innovation is the main driver of productivity growth through history. But that innovation depends in turn upon workforce skills and investment in R&D. Expanding access to evidence-based programs, especially for young adults, where mental health problems and productivity returns are high, could be especially beneficial.

Tax policy Regulation Reduction in low-skilled and semi- skilled migration

Reduction in low-skilled and semi- skilled migration

Productivity is output per head. We need faster growth in the numerator and slower growth in the denominator. Faster growth in the numerator could be promoted by lower business taxes (to promote investment) , less restrictive business regulations and slower progress towards net zero. Slower growth in the denominator could be promoted by returning to historic norms regarding our annual immigration intake.

Industrial Relations Regulation Tax Policy

TAX POLICY

This year 2025 Australia is expected according to the RBA to achieve output per hour worked of 0.7% per hour. Standard and Poors tell us that the US this year will achieve output per hour worked of 1.7% per hour. The US has a more flexible labour market than Australia , has a lower corporate tax rate than Australia and has a higher level of R&D than Australia. The US current Administration is rapidly deregulating. There are many ways to lift productivity. What is missing is the will.

Innovation and R&D promotion Housing

Few things are as closely linked to productivity as investment in intellectual property, including research and development and software. Encouraging more of this kind of innovation through well-targeted tax incentives and policy support is crucial for lifting long-term growth. At the same time, Australia?s high housing costs are holding back productivity by making it harder for skilled workers and high-performing firms to locate where they are most productive, which is typically in our major cities. Tackling these housing barriers would help ensure talent and ideas can flow to where they have the biggest impact.

Skills and workforce capability Competition policy

Tax policy Industrial Relations Skills and workforce health and capability

Skills and workforce health and capability

Does Australia have a productivity crisis? Economists are divided on this question. I argue that Australia has a productivity debate crisis, which contributed to our ability to address our productivity problem. Making the productivity debate more inclusive, for example by working on our industrial relations, and fixing our taxation system may go a long way to addressing both of these crises. The June 2024 KPMG report reminds us that it is not unusual for advanced economies such as the US, Canada and Australia to experience long lasting ?regimes? of high or low productivity growth. Fluctuations in labour productivity and Total Factor Productivity are a normal part of long-term economic fluctuations in many advanced economies. Nonetheless, it is important to identify factors that make low productivity a seemingly permanent problem. If productivity in Australia is a structural issue, what are its key features? Raising the quality of the productivity debate by collectively agreeing on key drivers and possible responses is paramount to supporting political steps that can address the productivity problem. Danielle Wood, Chair of the Productivity Commission, claims correctly that Australians get a lot of things wrong about productivity. That productivity is important for standard of living is well accepted. More contested is the claim that labour productivity is a sufficient condition for improving living standards. With a rising gap between labour productivity and wages, Wood asks why should "everyday Australians care about productivity growth in the first place? What?s in it for them?? Closing the gap between productivity and wage growth is crucial not only for coherence of the productivity debate but also to any serious engagement with the productivity problem. The ABS concedes that ?estimating productivity growth over time is difficult and necessarily involves making a range of assumptions that must be taken into consideration when analysing productivity statistics?. Acknowledging complexity in the productivity debate is important. However, whatever the statistical complexities, the contribution of a falling capital labour ratio to the productivity problem remains significant. Understanding how "capital shallowing" drives the productivity issue is critical to the productivity discussion. Accepting the possibility of a capital investment problem raises questions about the tax system and its readiness to mitigate the effects of a falling capital labor ratio on productivity. If KPMG is right that the effectiveness of capital (re)allocation rather than simply capital deepening is important for high and sustained productivity growth in Australia, we need to focus on preparing the workforce for ongoing changes in the allocation of both tangible and intangible capital. Converging on the importance of these questions places emphasis on our skill and workforce capabilities. The funding of our (public) schooling and training systems has been neglected for too long, but there are other aspects that require our attention. For example, mental health and mental health in the workplace have been worsening in Australia for decades, according to the 2024 National Baseline Report for Mentally Healthy Workplaces. In 2020, a Productivity Commission report estimated that mental illness and suicide cost the Australian economy up to $70bn per year, with a further cost of $150bn per year in diminished health and reduced life expectancy for people living with mental illness. Finally, most Australians are likely to agree with Danielle Wood that technology is critical for productivity growth. While global investment in AI is astronomical, the workplace adoption of AI technologies has been slow. The Jobs and Skills Report 2025 | Jobs and Skills Australia report reassures us that ?31% of Australia?s workforce are currently in highly augmentable occupations, compared to 4% in highly automatable occupations.? AI may well deliver productivity growth and improvements in job quality, but it will only do so through well-designed industrial relations that ensure workers? voices are included. In this context, the codesign of workplace and management changes that address workers' concerns and enhance their engagement in innovation are essential for improving productivity.

Innovation and R&D promotion Industrial Relations Housing Tax policy

Housing, tax policy

We need industry policy and education and training which reflects and builds on Australia?s resource endowments including renewables. We need industrial relations legislation which promotes workplace skills and wages to raise the aggregate demand which drives productivity and distributes the benefits more equitably. And we also need tax structures and public housing on an equitable basis. It is a synergy not a trade off.

Regulation Competition policy Tas reform

Tax reform

Last August, I had the privilege of joining the Economic Reform Roundtable at Parliament House in Canberra?a place that holds personal significance. Over 30 years ago, I arrived in this city with no networks and a humble background to take up a lectureship at ANU. Since then, I?ve built a life, raised a family, and enjoyed a rewarding career across academia, government, and the private sector. Australia, too, has grown more prosperous?but not everyone has shared equally in that progress. Our prosperity has rested on the mining boom and the tough reforms of the 1990s. Back then, we understood that competitiveness required every lever we had. Today, that mindset has weakened. Too often, we divide one national economy into eight smaller ones. That?s why I proposed reforming how regulators adopt standards. Standards underpin everything?from EV charging to food safety. Done well, they build trust. Done poorly, they delay projects, deter investment, and stifle competition. Harmonising and reforming how regulators adopt standards is a low-cost, high-impact reform?and a test of how serious we are about building a single, competitive national economy, whether in standards, occupational licensing, transport restrictions, or procurement rules. My report, commissioned by the Australian Treasury at the 2024 Australia?New Zealand Climate and Finance 2+2 Ministerial Dialogue can be accessed here: https://treasury.gov.au/publication/p2025-695993. Even better, both governments have committed to using it to sharpen regulatory settings, boost trade, and lift living standards across Australia and New Zealand: https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/media-releases/australia-and-new-zealand-deepen-economic-ties.

Skills and workforce capability Competition policy

Although it might seem obvious that "innovation and R&D promotion" and "Tax policy" would be important and direct ways to boost productivity, the catch is that these policies tend to be "captured" in ways that they do the opposite of what is intended. Of course, if these policies were designed well, then they would be useful in addition to "Skills and workforce capability" and "Competition policy". Skills and workforce capability would seem to be the main potential driver of productivity in the sense that a more skilled workforce is ultimately the only way to get more output per worker (a standard definition of productivity). A need for greater skills crosses many industries in Australia, from construction to white collar jobs. Competition policy is also famously prone to capture. But Australia really does have high concentration in many industries, including retail and distribution, that hinders our productivity. More competition will force these industries to improve efficiency and innovate.

Housing Skills and workforce capability Social cohesion Health and mental health

Braoder social cohesion measures, health, mental health measures

Innovation and R&D promotion Skills and workforce capability Making remote work easier

Making remote work easier

The big problem in Australia's productivity debate for the last 30 years has been the failure to measure labour input properly. That includes work intensity, unpaid and unreported hours, and time spent commuting. When labour input is properly measured, WFH has been a bigger benefit than all the micro reforms of the 1990s combined.

Skills and workforce capability Innovation and R&D promotion Competition policy Attract investment in the non-mining sector

competition policy; attract investment in the non-mining sector.

Australia's small market size, dependence on global trade, and vulnerability to commodity cycles all impact its productivity performance. Its geographic isolation limits economies of scale and reduces the clustering advantages found in larger economies. To boost productivity growth, Australia needs to strengthen its innovation systems, upgrade its digital infrastructure, and enhance competition. The speed at which businesses adopt new technologies, along with how effectively workers adapt and upskill, plays a crucial role in this process. However, current data indicate that Australia invests less than 1.7% of its GDP in research and development (R&D), well below the OECD average of 2.7%. This places Australia 22nd out of 38 OECD countries. Additionally, it ranks lowest in university-business collaboration, pointing to a critical area for improvement.

Skills and workforce capability Tax policy

Skills and workforce capacity are key inputs to productivity. Technological change leads to productivity gains; however, without the skills and training to translate new developments into practice we cannot improve efficiency (technical and allocative) to reach the potential frontier. Our tax system requires some key changes. Personal income, GST and business Income taxes are no longer fit for purpose. A number of experts have written about the reforms that are required. It is time for the parliament to act.

Innovation and R&D promotion Regulation More private sector non-mining investment

More private sector, non-mining, investment

Productivity rises come mainly from innovation and increased capital per hour worked. Australia has been doing poorly in both, outside of the resources sector. An example is the energy transition, where we have an enormous challenge but low and falling levels of research. Skilfully designed and implemented regulation is essential for the wellbeing of people and nature. But if poorly designed and implemented, it is a major impediment to the innovation and investment that we need.

Innovation and R&D promotion Tax policy

Australia needs to ramp up, and more widely diversify, our investment in R&D innovation. While the OECD average investment in R&D and innovation has been rising over the past decade, Australia's has tumbled in the opposite direction. In 2021-22, Australia spent 1.68% of GDP on R&D, well below the OECD average of 2.7%. But it's not just the amount of the spend; there's a need for a broader dispersion over more sectors. Currently around a third of business R&D spending goes to professional, scientific and technical services, a quarter goes to manufacturing, and the next largest share goes to financial services. Where are the productivity-boosting investments in care and community services, for instance, where demand for services is swelling? There is huge potential ? and need ? to improve efficiency in the delivery of care services. For instance, smarter technology and software can equip care workers to more efficiently design their work schedules and manage record-keeping. This frees up their time to spend their time on higher-value tasks that can't be outsourced to computers or machines, such as the human interactions that are the essence of care work. This would be productivity-enhancing but, because the care sector is undervalued, the market signals aren't currently there to attract this type of investment. We need incentive structures to diversify this R&D investment, and reward the wider diffusion and practical translation of new knowledge and innovation across the economy. Well-designed subsidies or tax credits can be a lever, but there needs to be a stronger onus on verifying the productivity (not just the profitability) returns. There are international examples of knowledge-sharing infrastructure that brings research and business worlds together to scale up the usability of R&D outputs, such as the UK Catapult Network and Campbell Collaboration. It would be a real boost to the dynamism of the economy and spirit of Australian innovation if ? instead of multi-property real estate portfolios ? we could see more investors channel their capital into more Australian-led start-ups, business expansions, innovative R&D ventures and social impact initiatives. Sweeping out the inefficiencies and distortions that tangle up our tax system and regulatory settings is clearly needed too. The need to fix the structural budget deficit presents an opportunity to tax less of the activities that boost productivity (such as personal and corporate income) and less of the activities with zero or low productivity yield (such as wealth accumulation and the consumption of non-essential or luxury goods).

Housing Tax policy

Investment in R&D in the pursuit of innovation is an imperative for any country which has succeeded in placing itself at, or close to, the technological frontier, be it across the board or in one or more critically consequential sectors ? as it is for any country possessing the ambition, the discipline, and the material and intellectual wherewithal to ascend to such a position. Australia is not such a country. Rather, the challenge of boosting productivity in Australia is, in one respect, the same as the challenge facing all countries, irrespective of their level of development. Drawing on already-existing means of production and already-existing production techniques, Australia needs (1) to re-direct capital and labour from unproductive to productive employment and (2) to invest in those means of production and production techniques that lift the productivity of capital and labour used in productive employment. In another respect, the challenge facing Australia is distinctive, if not quite unique. Doubtless, there is a multiplicity of factors that may be cited in explaining the stagnation in Australian productivity. And, doubtless, some of these factors are present in other comparable countries that have experienced poor productivity growth. But there is also a single factor of immense quantitative bearing, a proverbial ?elephant in the room?, that distinguishes the Australian case from the more complex record of other OECD member-countries ? and helps to explain Australia?s relative decline, relative to other member-countries, in the OECD productivity rankings, as noted in the Treasurer?s speech cited above: https://jimchalmers.org/latest-news/speeches/building-a-new-economy-on-five-pillars-of productivity/ That ?elephant in the room? is Australia?s housing market. Consider this key data point: the increase in the house price to income ratio cited by Hal Pawson and Vivienne Milligan in the city futures blog earlier this month:https://blogs.cityfutures.unsw.edu.au/news/it-will-take-lot-more-rate-cuts-ease-australias-housing-affordability-crisis. Of the 25 OECD countries surveyed, and with the single exception of the micro-state of Luxembourg, Australia has registered the highest increase in this ratio over the period from 1985 to 2023. Hence, over many years, Australia has developed a peculiarly unbalanced economy. In the resources sector, investment continues to flow, and new and better means of production and production techniques are introduced as required. But outside this sector, a large quantum of capital and labour, and in particular an extraordinarily high share of bank lending, is devoted to the wholly unproductive activity of bidding up house prices ? as distinct from constructing and renovating houses and related infrastructures. In turn, this trap exerts a downward pressure on productivity in several ways. It reduces the flow of investment into new means of production and production techniques in established industries and even more so into new industries. It reduces consumer demand for the products of established and new industries, and thereby the potential for productivity growth through scale economies in these established and new industries. And through the debilitating effects of the financial burden it places on mortgage-payers and renters alike, not to speak of the homeless, it reduces the potential productivity of a considerable section of the actual and potential workforce. Remarkably, whilst all this does much damage to the Australian economy and to very many Australians, it benefits only a small minority. The renting third of the population and the renting third of mortgage payers both lose. Of the third who own their houses outright, those who own only their own home gain nothing: the higher price of their present property will be offset by the higher price of their next purchase or the purchase-price paid by their children. Nor would they lose from a fall in house prices: the lower price of their current property would be offset by the lower price of their next purchase or the purchase-price paid by their children. It is only the owners of multiple properties who gain materially. To date, much effort has been spent on the search for the ?causes? of the extraordinary increase in house prices and the house price to income ratio experienced in Australia. On the supply side, analysts have looked at delays and other inefficiencies in the planning process; at planning restrictions in several particulars; at the culture of NIMBYism; and so on. On the demand side, analysts have looked at tax measures such as negative gearing and the capital gains discount; at monetary policy since the GFC and the regime of negative real interest rates that it introduced; at the interplay between tax measures and monetary policy (see for example Ian Verrender?s recent article on this point: https://www.abc.net.au/news/2025-10-28/melbourne-cup-day-rba-rates-decision-could-lift-property-prices/105938524 And, as always, at immigration. But I think that there is an important sense in which this search for ?causes? ? a search to which I too am guilty of contributing aplenty over the years ? is misplaced. Arguably, it is almost a category error. By way of analogy, consider a forest fire. The initial cause of the fire might have been arson or perhaps carelessness or perhaps inefficient or insufficient burn-off before the fire season or some combination of these and other factors. But once the fire begins to feed on itself, the requisite response ? the evacuation of communities, the creation of firewalls, the water-bombing of selected sites, and so on ? has little to do with identifying and undoing the ?correct? initial cause. The latter might well provide lessons for future reference. But the solution itself must focus on the result and not the cause. I submit that Australia?s housing market is now a fire that feeds on itself. It is a defining feature of our economy and society. Most key decision-makers, including most Members of Parliament, not to forget the Member for Grayndler, are multiple property-owners. Their wealth and status, their life-plans and retirement plans, are based in large part on remaining multiple property-owners in a country with sky-high house prices and sky-high house price to income ratios. Every investor, choosing where to invest, is aware of it. Every resident, choosing whether or when to buy, is aware of it. It is our reality. Given this reality, it is scarcely likely that this fire can be put out by this or that modest policy change here and there ? let alone by announcements of ?Plans? and ?Strategies? to introduce policy changes sometime in the future. Nor is it likely that the current governing class will gladly choose to implement the requisite solution. Nonetheless, I think it important to highlight this requisite solution in order to make it available for the day when the Australian majority is ready to assert its own interests. The requisite solution is this: to tax out the economic rent from land. The requisite instrument, the land tax, is already established and in use ? but it is applied today only in homeopathic doses. What is required is to apply it anew to the requisite extent. The effects of such a change would be felt across the board and in short order. As The Economist newspaper has argued, using evidence from Denmark and elsewhere, ?changes in land-tax rates [are] fully and quickly capitalised in house prices? ? see https://www.economist.com/briefing/2018/08/09/the-time-may-be-right-for-land-value-taxes. Thereafter, with house prices and house price to income ratios radically reduced, investment would flow into productivity-enhancing means of production and production techniques in established and new industries in the larger economy; consumer demand for the products of established and new industries would rise, enabling further productivity gains through scale economies; and workers would be freed from the financial burden of exorbitant housing costs and thereby freed to deploy their energies undistracted in productive employment. As for housing itself, it would cease to be a speculative asset class and become what it used to be ? namely, a durable consumer good, satisfying an essential human need. It would serve much like the sturdy cashmere coat I purchased thirty-three years ago and which continues to serve me well, providing protection against the freezing cold of many a North European winter and many a Tasmanian summer.

Skills and workforce capability Competition policy Innovation and R&D promotion Simpler regulation of planning and occpational licencing

Innovation and R&D promotion; simpler regulation of planning and occpational licencing

Housing Industrial Relations Road charging

Road charging

Allowing higher housing density in inner suburbs would lead to a large increase in actual (but not measured) productivity. For every extra dollar we allow to go into apartment construction in Sydney, we get $1.60 in value -- a much higher payoff than from other reforms.

Innovation and R&D promotion, Skills and workforce capability

Agglomerations matter for productivity. Agglomerations are localised clusters of interrelated businesses. Business and other producers learn from colleagues and competitors through worker mobility and networking. And the critical information is typically transmitted through narrow inter-personal channels. Knowing about hidden new technologies, new markets, customer preferences, and what other global players are planning are not things that can be gleaned from the internet or newspapers in a timely manner. Growing a cluster of similar business operations also allows for the viable creation of supporting businesses and institutions ? be it suppliers of components, R&D centres, logistics or supportive government agencies. And this is where the Government?s Made in Australia policy can come to the fore. We need to establish new pathways to market for Australian scientific success for productivity growth. Establishing known routes for exploiting ideas is vital for reducing the risk of innovation and R&D. Higher degree researcher training is a potential unsung hero in technology transfer and upgrading both technological and absorptive capacity of the private sector. Improving worker mobility between universities/CSIRO and companies can enhance the transfer of know-how between organisations (as goes the aphorism ?If you want to transfer knowledge, wrap it up in person?, but it builds bonds of trust between organisations that are critical for investing in uncertain and opaque technologies. Without trust, the market for technology and ideas falls apart. These are areas where government programs can catalyse industrial transformation.