The root cause of Australia’s productivity collapse

Over the past decade, the Australian economy has recorded some of the poorest productivity growth in the world and the nation’s poorest productivity growth on record.

Last week, I presented five reasons why Australia’s productivity growth has declined, namely:

1. The mining boom of the 2000s and the associated surge in the Australian dollar contributed to the contraction of Australia’s manufacturing sector.
2. Capital shallowing, driven by record immigration without a corresponding acceleration in infrastructure and business investment.
3. Explosive growth in the non-market economy, facilitated by the expansion of the NDIS.
4. Soaring energy costs, driven by gas policy failures and net-zero policies.
5. Poor tax policies encouraging housing speculation over productive investment.

The lion’s share of my discussion focused on the problem of capital shallowing, which caused the growth in labour productivity and per capita GDP to fall as immigration/population growth rose.