In this week’s Treasury of Common Sense on Radio 2GB, I discussed (among other things) Australia’s abysmal productivity performance, which is among the poorest in the world.
As shown in the next chart from Justin Fabo at Antipodean Macro, Australia’s labour productivity (GDP per hour worked) is tracking at 2016 levels, and has performed far worse than other advanced nations:
Below are key highlights from the interview.
Australia’s labour productivity is basically tracking at the same level as it was in 2016. It’s really poor and the main reason for that is that Australia has suffered from what economists call “capital shallowing”.
Because our population has grown so quickly, it’s grown a lot faster than we’ve grown business investment, infrastructure and also housing.
What this basically meant is that we’ve had less capital per worker, which is absolutely disastrous for productivity. And the real telling point here is that the other country that’s also had abysmal productivity performance is Canada, which has also had a record migration boom.
Their population grew by about 1.2 million people last year, which is off the charts. And they’ve had a similar productivity decline.
The National Bank of Canada which is one of their big five banks put out a really good report a couple of weeks ago. It said that Canada in caught in a “population trap”.
That’s basically the same problem as Australia. They said Canada’s population is growing faster than business investment, infrastructure and housing, and that has meant that they’ve worsening congestion costs, a rental crisis, and a decline in productivity.
Basically, Australia and Canada are in exactly the same boat because they’re running the same stupid policies…
The government and outfits like the Grattan Institute and other migration shills claim that running a high immigration policy is good for productivity because our migration system is supposedly skilled.
So, if you bring over a whole bunch of skilled migrants, you’re going to boost productivity.
The problem is that the empirical data says the opposite. The majority of Australia’s migration program is actually not skilled.
The whole notion that we’re running a skilled migration program is an absolute farce. And it’s borne out by the dismal productivity performance of Australia, which started when we ramped up immigration in the mid-2000s.
Exactly the same thing has happened in Canada. It is no coincidence that Australia and Canada are both experiencing the same outcomes. They’re basically running population growth at levels that are far beyond their business investment, infrastructure investment and housing.
As Gerard Minack said, the biggest ingredient in Australia’s poor productivity performance is “a giant capital-to-labour switch. Australia relied on increasing labour supply rather than increasing investment to drive growth”.
That’s the capital-shallowing argument I mentioned. Australia and Canada are doing exactly the same thing. And we’ve got the same outcomes.
These are the facts.