Business Council of Australia CEO Bran Black warns lagging pay levels to drag on unless major change occurs

The lobby group for Australia’s most powerful corporate chief executives says workers will continue to see their pay levels lag behind inflation unless the nation’s productivity crisis is resolved.

Australia’s productivity, measuring hourly output in the labour force, has been going backwards in the 2020s and without a dramatic improvement, it would be the worst since records began in 1960 and continue contributing to high inflation.

Bran Black, the CEO of the Business Council of Australia, said higher corporate tax rates and more rigid industrial relations policies were to blame for falling productivity.

“What that points to is a need for us to have that type of reform, and it’s really important because ultimately productivity is the driver of real wages growth,” he told ABC Radio on Monday.

“If we’re to achieve more business investment and lift productivity and reduce inflationary pressure, we have to have more competitive settings, and that means we need to address those core challenges that are already in place in terms of our taxation settings, our regulatory settings, and our industrial relations settings.”

Apart from a surge in data centre spending for AI, overall business investment in Australia is still weak, with technology generally regarded as necessary to make workers more productive.

While productivity is still growing strongly in the United States, it’s been declining in Australia since the aftermath of COVID.

“We know that countries that have better quality settings in those areas are attracting more investment and have improved productivity rates,” Mr Black said.

“If Australia wants to deliver a higher level of productivity, it follow that we need to have those more competitive settings to attract investment.”

Australia’s productivity level fell by 0.2 per cent during the last financial year and it was flat in the June quarter.

This weak productivity means Australia continues to have an inflation problem even if the economy grows at a relatively weak pace of 2 per cent a year.

Productivity levels have declined for the past six years and the Business Council of Australia is warning the economy will be on track for the worst level of productivity since records began in 1960 under the current trajectory.

That is a sharp decline from the 1990s to the mid-2000s when annual productivity growth averaged 2.1 per cent, following the advent of the internet and new regulations tackling anti-competitive behaviour.

The productivity crisis intensified in 2022 after COVID and Russia’s Ukraine invasion, when the highest inflation since 1990 led to output plunging.

Since coming to power, Anthony Albanese’s Labor Government has reintroduced multi-employer bargaining so pay increases can be more easily replicated across an industry.