RBA and Productivity Commission warn of weak productivity growth

Reserve Bank of Australia (RBA) economist Michael Plumb has warned that weak productivity growth is limiting Australia’s economic potential, with labour productivity barely improving since 2016. While the RBA expects a recovery to one per cent growth in the medium term, past projections have not materialised, raising concerns about long-term economic stagnation.

 The Productivity Commission’s latest Annual Productivity Bulletin highlights similar issues, showing that multifactor productivity—how efficiently capital and labour are used—rose just 0.1 per cent in 2023–24, well below the 20-year average of 0.3 per cent. Deputy Chair Alex Robson called this a sign of ‘creeping inefficiency,’ noting that recent labour productivity gains were driven mostly by investment rather than better ways of working.

 With real wages growing faster than productivity, the RBA warns this could increase cost pressures. Both institutions stress that improving productivity is not just about innovation—it also requires better adoption of existing ideas and practices.