5 Year Productivity Inquiry: A competitive, dynamic and sustainable future

Time to take the handbrake off Australia's productivity

Overcoming challenges presented by climate change and an increasingly unfavourable global trade and investment landscape will be necessary to reinvigorate Australia’s business environment and accelerate productivity growth.

“Businesses need to operate in an environment in which they can make productivity-enhancing decisions. This requires an open economy with dynamic, contestable and flexible markets,” Productivity Commission Deputy Chair, Dr Alex Robson said.

The Productivity Commission’s fourth interim report – released as part of its 5-year Productivity Inquiry – investigates the risks and opportunities confronting Australia’s business environment.

“Competitive pressures push businesses to work smarter and strive to constantly improve their products and services, which ultimately benefits consumers,” Dr Robson explained.

“Business investment has been declining. Reversing that trend will require getting our policy and regulatory settings right. Any government interventions, such as taxes or subsidies, should only be pursued if they clearly deliver net social benefits.”

Trade in goods and services and foreign direct investment are key sources of competitive pressure for Australian companies and we cannot afford to close ourselves off from the rest of the world.

Supply chain shocks and global upheavals do not diminish the case for openness. In fact, increased global linkages are likely the best way for Australia to build resilience to deal with future upheavals and uncertainties.

“Adapting to the impacts of climate change and decarbonising the Australian economy will come with costs. However, compared to a scenario of unmitigated climate change, climate policy could prove to be positive for productivity in the longer-term, particularly if we pursue least cost mitigation and adaptation,” Dr Robson said.

“We accept that these issues are complex and won’t be simple or easy to address. That is why we are now seeking ideas from industry and experts to help inform our final report and recommendations.”

A full copy of 5-year Productivity Inquiry: A competitive, dynamic and sustainable future, is available at the Commission's website: www.pc.gov.au. Submissions close 21 October 2022.

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• Preliminaries: Cover, Copyright and publication detail, Opportunity for comment, Terms of reference, Acknowledgements, Contents and Foreword
• 1. Competitive and dynamic markets
  • 1.1 Introduction
  • 1.2 The investment challenge
  • 1.3 Competition and dynamism
• 2. Openness to trade and foreign investment
  • 2.1 Introduction
  • 2.2 Building trade resilience
  • 2.3 Addressing barriers to trade in goods
  • 2.4 Avoiding undue constraints to foreign direct investment
  • 2.5 Facilitating trade in services
• 3. Managing the climate transition
  • 3.1 Physical impacts
  • 3.2 Adaptation policy
  • 3.3 Efficient emissions reductions
• A. Indirect carbon price estimates
• References