{"id":350530,"date":"2025-12-15T23:38:15","date_gmt":"2025-12-15T23:38:15","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/350530\/"},"modified":"2025-12-15T23:38:15","modified_gmt":"2025-12-15T23:38:15","slug":"australias-productivity-collapses-to-zero","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/350530\/","title":{"rendered":"Australia&#8217;s productivity collapses to zero"},"content":{"rendered":"<p>The collapse in Australia\u2019s labour productivity is well documented.<\/p>\n<p>An <a href=\"https:\/\/www.afr.com\/policy\/economy\/australia-is-better-only-than-mexico-on-this-economic-ranking-20250929-p5mypl\" rel=\"nofollow noopener\" target=\"_blank\">OECD analysis<\/a> published in The AFR found that Australia ranked second-last among wealthy nations in productivity growth since the COVID-19 pandemic.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2025\/12\/Average-productivity-growth.png\" width=\"510\" height=\"660\" alt=\"Average productivity growth\"\/><\/p>\n<p>EY\u2019s chief economist, Cherelle Murphy, says the decline in Australia\u2019s productivity 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<p>\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<p>Advertisement<\/p>\n<p>\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<p>Murphy added that corporate Australia\u2019s expenditure on research and development is also below that of other countries.<\/p>\n<p>I have raised similar concerns repeatedly.<\/p>\n<p>Private business investment as a percentage of GDP is tracking close to recessionary levels, as illustrated below by renowned independent economist Gerard Minack:<\/p>\n<p><img src=\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2025\/12\/Net-investment.png\" width=\"660\" height=\"428\" decoding=\"async\" loading=\"lazy\" alt=\"Net investment\"\/><\/p>\n<p>Advertisement<\/p>\n<p>As a percentage of GDP, new machinery and equipment\u2014which are essential to raising worker productivity\u2014are tracking at historically low levels, as Alex Joiner of IFM Investors shows below. It is currently around half of what it was twenty years ago, at 4.6% of GDP:<\/p>\n<p><img src=\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2025\/12\/Private-investment.png\" width=\"631\" height=\"516\" decoding=\"async\" loading=\"lazy\" alt=\"Private business investment\"\/><\/p>\n<p>As a result, the numerator of the capital-to-labour ratio has been weak, approaching recessionary levels.<\/p>\n<p>Advertisement<\/p>\n<p>In the meantime, huge volumes of low-skilled immigration have caused the denominator of the capital-to-labour ratio to increase.<\/p>\n<p>This century, Australia\u2019s population has grown far more quickly than that of other developed countries and has easily exceeded business, infrastructure, and housing investment. This population surge has also contributed to the \u201ccapital shallowing\u201d of the country.<\/p>\n<p><img src=\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2025\/07\/Population-change-this-century.png\" width=\"636\" height=\"513\" decoding=\"async\" loading=\"lazy\" alt=\"Population change this century\"\/><\/p>\n<p>Advertisement<\/p>\n<p>Australia has not provided the required equipment, technology, or tools to the millions of new migrant workers. For the millions of extra families, it hasn\u2019t supplied adequate housing and infrastructure.<\/p>\n<p>This \u2018capital shallowing\u2019 has reduced the amount of capital invested per person, which has hurt Australia\u2019s productivity. Average quality of life has also declined.<\/p>\n<p><img src=\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2025\/12\/Capital-shallowing.png\" width=\"660\" height=\"439\" decoding=\"async\" loading=\"lazy\" alt=\"Capital shallowing\"\/><\/p>\n<p>Advertisement<\/p>\n<p>Mark the Graph has <a href=\"https:\/\/x.com\/Mark_Graph\/status\/1999670890620182572?s=20\" rel=\"nofollow\">published<\/a> an interesting report on Australia\u2019s multifactor productivity, which paints a similar picture.<\/p>\n<p>\u201cWe\u2019re not working smarter\u201d, Mark wrote on Twitter (X).<\/p>\n<p><img src=\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2025\/12\/Trend-MFP-growth.png\" width=\"660\" height=\"338\" decoding=\"async\" loading=\"lazy\" alt=\"Trend MFP growth\"\/><\/p>\n<p>Advertisement<\/p>\n<p>\u201cAustralia\u2019s multi-factor productivity growth has collapsed to zero. GDP growth now comes almost entirely from more labour hours (i.e., immigration), not efficiency\/technology gains\u201d.<\/p>\n<p><img src=\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2025\/12\/GDP-growth-composition.png\" width=\"660\" height=\"334\" decoding=\"async\" loading=\"lazy\" alt=\"GDP composition\"\/><\/p>\n<p>\u201cThe 1990s productivity dividend is spent\u201d.<\/p>\n<p>With its manufacturing sector in terminal decline due to skyrocketing energy costs, it is difficult to see how Australia can achieve \u2018capital deepening\u2019 or an increase in the capital-to-labour ratio, and boost productivity growth.<\/p>\n<p><img src=\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2025\/12\/Manufacturing-share.png\" width=\"660\" height=\"415\" decoding=\"async\" loading=\"lazy\" alt=\"Manufacturing share\"\/><\/p>\n<p>Advertisement<\/p>\n<p>As net-zero plans and gas policy failures cause energy costs to skyrocket, Australia will continue to deindustrialise and export its remaining manufacturing sector to countries with lower energy costs. As a result, businesses will make fewer capital investments in Australia.<\/p>\n<p>The federal government also plans to add 13-plus million people to the country\u2019s population during the next 40 years.<\/p>\n<p><img src=\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2025\/08\/Australian-population-projections.png\" width=\"660\" height=\"133\" decoding=\"async\" loading=\"lazy\" alt=\"Population projection\"\/><\/p>\n<p class=\"wp-caption-text\">Source: The Centre for Population (December 2024)<\/p>\n<p>Advertisement<\/p>\n<p>In 40 years, Australia\u2019s population will grow by the equivalent of another Sydney, Melbourne, and Brisbane, necessitating an unprecedented level of infrastructure, housing, and business investment to maintain the capital stock per person.<\/p>\n<p>Such historically high levels of investment are not achievable and will inevitably lead to more \u2018capital shallowing\u2019 and slower productivity growth in the economy.<\/p>\n<p>In summary, Australia faces a future of low productivity and deteriorating living standards because it is hell-bent on committing energy policy suicide, deindustrialisation, and flooding the nation with low-skilled migrants.<\/p>\n<p>Advertisement<\/p>\n","protected":false},"excerpt":{"rendered":"The collapse in Australia\u2019s labour productivity is well documented. An OECD analysis published in The AFR found that&hellip;\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":{"0":"post-350530","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-au","9":"tag-australia","10":"tag-business","11":"tag-economy"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/350530","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=350530"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/350530\/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=350530"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=350530"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=350530"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}