Labor Keeps Workplace Laws Out of Productivity Inquiry

The Albanese government left workplace relations out of the Productivity Commission’s inquiry into “corporate dynamism,” although many participants said industrial laws affect productivity. Commission chair Danielle Wood said the decision leaves a major part of the economy outside the examination.

“It doesn't make sense to leave a big area like workplace relations totally off the table,” Wood said in an interview. Treasurer Jim Chalmers set the inquiry’s terms of reference, which also excluded tax. Chalmers appointed Wood to the commission in 2023.

Who Sets the Terms

The commission described Australia’s economy as “increasingly stagnant.” Its report said weak business investment had lowered the economy’s growth potential without fuelling inflation, and blamed more than a decade of excessive government regulation for dulling its “animal spirits.” The inquiry can examine the regulatory conditions in its remit; workplace relations and tax stayed out, despite participants’ views on industrial laws.

Labor introduced workplace changes after winning government in 2022. They include a multi-employer bargaining scheme and same-job-same-pay laws. Labor and unions say the changes have strengthened wages. The Coalition and economists who favour lower regulation argue the laws have further clogged Australia’s slow-moving economy. The arguments conflict, but Wood says reviewers should examine the rules’ productivity effects.

“We have had a long-standing challenge with the complexity of the awards systems which add to the costs and complexity of doing business,” she said. “Given the number of changes the government has introduced to the system in recent years, it would be good practice to review how those are working with a particular focus on productivity impacts.”

Wood said her biggest surprise in three years in the role was the scale of red tape. Boards now spend 55 per cent of their time on compliance, she said, up from 24 per cent a decade earlier. ABS data show federal public service wages rose 7 per cent last financial year. That figure emerged hours before the commission published its report.

Who Pays for the Economic Squeeze

Prime Minister Anthony Albanese delayed travel to the COP climate summit next week to chair back-to-back budget meetings. Albanese and Chalmers are seeking to reduce spending and put downward pressure on interest rates as calls for an economic shake-up grow, including from within Labor.

Reserve Bank governor Michele Bullock warned of a “new normal” of subpar growth and announced a further increase in official interest rates this week. She said the bank wanted to slow the economy and avoid tipping it into recession. The effort spreads costs across the economy, while ministers, economists and central bankers continue debating spending and workplace rules.

In speech notes, Reserve Bank deputy governor Andrew Hauser said the world had entered a more volatile and uncertain period, hit by a “fusillade of shocks,” including higher tariffs, geopolitical tensions, technological change and environmental challenges. “That means inflation is likely to be pushed off target; economic forecasts are more likely to be wrong and policy trade-offs get uglier,” he said.

The Proposed Fixes

Independent MP Allegra Spender told ABC TV that Labor should further reduce a tax concession for electric-vehicle purchases. A lower price cap followed strong uptake in the May budget. She also called for slower infrastructure spending to ease inflation. UNSW economics professor Richard Holden backed Spender’s call on the EV subsidy and said Chalmers should proceed with his proposed road-user charge for all drivers. The article reported the previous week that Albanese opposed the proposal. Holden said a charge was necessary to fill the fuel-excise gap and would have a small disinflationary effect.

The commission recommended cutting red tape, refining insolvency and financing systems, and improving Australian management skills and qualifications to US standards. It said those measures could lift productivity by nearly 10 per cent. Wood praised Labor’s changes to environmental approvals and its efforts to streamline regulations across Australia, and said artificial intelligence showed signs of energising the US economy.

Holden warned that a prolonged period of slightly below-average GDP growth could compound over time and significantly reduce living standards. “When the economy is growing at or above trend, it also just makes the politics a lot easier,” he said, pointing to the post-1991 economic boom. “It's much easier to make trade-offs when almost everyone is doing better and you talk about winners and losers only at the margins.” He added: “It's very concerning for our economics but also our politics.”