{"id":183937,"date":"2025-10-02T01:50:24","date_gmt":"2025-10-02T01:50:24","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/183937\/"},"modified":"2025-10-02T01:50:24","modified_gmt":"2025-10-02T01:50:24","slug":"capital-shallowing-strips-australian-productivity-growth","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/183937\/","title":{"rendered":"Capital shallowing strips Australian productivity growth"},"content":{"rendered":"

Analysis from the OECD, published<\/a> in The AFR, shows that Australia ranks second-last among wealthy nations in terms of productivity growth since the COVID-19 pandemic.<\/p>\n

\"Average<\/p>\n

EY\u2019s chief economist, Cherelle Murphy, says the decline is partly attributable to \u201ccapital shallowing\u201d\u2014the fact that local companies are not investing enough capital in new equipment to match the growth in their workforce.<\/p>\n

\u201cWe\u2019ve had strong labour market performance, but at the same time, we have not had particularly strong business investment or innovation\u201d, she said.<\/p>\n

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\u201cYou\u2019re not going to get strong productivity growth because you\u2019re essentially asking workers to work with capital equipment that\u2019s not keeping up with the number of workers\u201d.<\/p>\n

Murphy added that corporate Australia\u2019s expenditure on research and development is also below that of other countries.<\/p>\n

It is good to see Australia\u2019s economic fraternity catch up with MB\u2019s view of Australia\u2019s productivity decline.<\/p>\n

As Alex Joiner from IFM Investors illustrates below, private business investment as a share of GDP remains near recessionary levels.<\/p>\n

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\"Private<\/p>\n

New machinery and equipment\u2014vital to increasing worker productivity\u2014are tracking at historically low levels as a share of GDP. At 4.3% of GDP, it is tracking at around half what it was two decades ago:<\/p>\n

\"Private<\/p>\n

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Leading independent economist Gerard Minack likewise illustrated that net investment in Australia is tracking at recessionary levels:<\/p>\n

\"Net<\/p>\n

Therefore, it is true that investment\u2014the numerator of the capital-to-labour ratio\u2014has been soft, tracking near recessionary levels.<\/p>\n

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Meanwhile, the denominator of the capital-to-labour ratio has grown rapidly via high volumes of low-skilled immigration.<\/p>\n

Australia\u2019s population has grown significantly faster than that of other advanced nations this century and has easily outpaced investment in business, infrastructure, and housing. This has contributed equally to the nation\u2019s \u2018capital shallowing\u2019.<\/p>\n

\"Population<\/p>\n

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Australia has failed to equip the millions of additional migrant workers with the necessary tools, machinery, and technology. It hasn\u2019t provided enough dwellings and infrastructure for the millions of additional families.<\/p>\n

As a result, everyone\u2019s standard of living has decreased.<\/p>\n

This \u2018capital shallowing\u2019 has negatively impacted Australia\u2019s productivity by reducing the quantity of capital invested per person.<\/p>\n

\"Capital<\/p>\n

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It is hard to see how Australia can realistically increase the capital-to-labour ratio, i.e., experience \u2018capital deepening\u2019, and lift productivity growth when its manufacturing sector is in terminal decline amid soaring energy costs.<\/p>\n

\"Manufacturing<\/p>\n

With energy costs poised to soar amid net-zero policies and gas policy failures, Australia will inevitably continue to deindustrialise and send what\u2019s left of its manufacturing sector to lower-energy-cost nations. In turn, companies will wind down capital investment in Australia.<\/p>\n

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At the same time, the federal government has committed to increasing the nation\u2019s population by 13.5 million over the next 40 years.<\/p>\n

\"Population<\/p>\n

Source: The Centre for Population (December 2024)<\/p>\n

Adding the equivalent of another Sydney, Melbourne, and Brisbane to Australia\u2019s current population in only 40 years will require an unprecedented amount of investment in business, infrastructure, and housing to maintain the capital stock per person.<\/p>\n

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Achieving such unprecedented levels of investment will be impossible and will inevitably result in the economy suffering from further \u2018capital shallowing\u2019 and slower productivity growth.<\/p>\n

In short, Australia is facing a low-productivity future, with declining living standards because we are hell-bent on committing energy policy suicide, deindustrialisation, and flooding the nation with vast volumes of low-skilled migrants.<\/p>\n","protected":false},"excerpt":{"rendered":"Analysis from the OECD, published in The AFR, shows that Australia ranks second-last among wealthy nations in terms…\n","protected":false},"author":2,"featured_media":183938,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[64,63,99,164],"class_list":["post-183937","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-au","tag-australia","tag-business","tag-economy"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/183937","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=183937"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/183937\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/183938"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=183937"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=183937"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=183937"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}