What the Space Race can teach us about productivity
On May 25, 1961 United States President John F Kennedy proposed to the Congress that the nation set a goal of landing a man on the moon and returning him safely by the end of the decade.
Kennedy’s comments not only fired the gun in the space race but they also began a productivity revolution. The US would invest heavily in mathematicians and scientists, research and development that would drive innovation and change the nature of business and lifestyles forever.
In the last 50 years technology has been the game changer when it comes to productivity. The introduction of the personal computer and internet to business has revolutionised communications and interaction between businesses particularly in the global context.
That’s why I find the recent debate about relative falls in productivity growth bewildering, particularly the squeals from the opposition and certain business groups trying to link our productivity malaise to the introduction of the Fair Work Act.
There are a number of deficiencies in short term measures of productivity, particularly labour productivity. Traditionally labour productivity is measured using national accounts indicators of GDP per hours worked in the economy.
A fall in output or GDP in the short term due to factors such as the Global Financial Crisis or the Queensland floods, while employment remains stable will naturally result in a fall in labour productivity growth as we have seen recently in Australia. This has nothing to do with the operation of the Fair Work Act.
Attempts to point the finger at a fairer workplace relations regime and the reason for falling labour productivity growth are short sighted and misleading. Similarly when we look at the measure of the productivity of our capital and our labour, or our multi-factor productivity, short term measures can be deceptive.
That’s because in some sectors such as mining and energy there are initial large investments of capital and labour for little or no output during the construction phase.
A much more sensible approach is to measure productivity over the longer term. In a medium open market economy like Australia productivity growth trends are often influenced by international trends. In the 1990’s productivity grew strongly in Australia as did most of the world. In the early part of this decade growth was more subdued throughout the world as it was here.
This in part reflects the slowdown in productivity following the boost provided from information technology developments during the 1990s.
But Australia’s surge in productivity growth in the 1990s was also driven by past economic reforms which transformed the Australian economy. These reforms included the de-regulation of the financial sector, the dismantling of the tariff wall and the introduction of statutory enterprise bargaining in workplaces, to name a few.
We also know that under the former Government, there was a decade of neglect for productivity-enhancing investment and reform, which has contributed to the long run decline in Australia’s product
These long term trends take time to reverse – often many years. That’s why the Gillard Government has a broad-based agenda to boost the productive capacity of our economy. This agenda does not include making Australians work harder and longer, or stripping away working conditions – this is not what productivity is about. You can’t blame the penalty rates of a female cleaner working a night shift as the reason for a fall in productivity growth.
In the modern global economy technology can play a key role in boosting productivity. Information technology is fundamental to the efficiency of businesses. That is why it is simply not good enough for Australian homes and businesses to have to rely on an out of date copper network to access the internet when the rest of the world has moved to high speed fibre.
Imagine the changes we can make to our lives when you can have your sick child diagnosed for minor illness by your doctor through your TV instead of waiting in the casualty or doctors surgery. Or attend your university lectures and ask questions of your lecturer from your lounge room. Or meet with clients half the way across the world from your boardroom.
Access to this technology is driving change and efficiency in business throughout the world and it’s time Australia caught up. That’s why the Gillard government is delivering the NBN throughout Australia.
The information revolution that began with Kennedy’s challenge in 1961 has been underwritten by government. It was the need for miniaturised guidance systems for intercontinental ballistic missiles and NASA rockets that led to the development of the microprocessor and the software they use.
It was the US government’s investment in APRANET that led to the modern day internet. And it will be the Gillard government’s investment in the NBN that will drive new communications and information to boost our productivity and ensure we remain competitive in the international economy.
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