CEDA Submission to the Select Committee on Productivity in Australia

Why do we care about productivity?

CEDA welcomes this opportunity to contribute to the Select Committee on Productivity. We share many of the Committee’s concerns about slow productivity growth in Australia and globally.

Sustainable productivity growth is needed to secure the future prosperity of all Australians. To achieve this will require strategies that are long-term and holistic. Stronger productivity outcomes are also essential to ensuring that Australia’s businesses are amongst the most competitive and dynamic in the world, and that all Australians have the opportunity and support to live a productive, connected and meaningful life.

Australian businesses should be amongst the most productive, competitive and dynamic in the world. Many measures of relative economic performance indicate, however, that Australia is losing ground. The IMD Global Competitiveness Index and IMD World Digital Competitiveness Index both showed a further decline in Australia’s global competitiveness in 2025, particularly in digital indicators and workplace training.

In the digital index, Australia ranked 23rd of 69 countries in 2025, down from 15th in 2024. Australia tumbled to 60th on employee training and 59th on international experience of talent, indicating inadequate digital training for Australian employees and inadequate recognition of international qualifications and experience. Business agility ranked 65th of the 69 countries in 2025, while the ability to respond quickly to opportunities and threats dropped to 57th. Addressing these challenges will be critical to achieving better productivity outcomes.

Measurement challenges and the role of government

Productivity is hard to measure, particularly at a time of rapid technological change and the introduction of new products and services. This challenge is especially clear in Australia’s growing services sector, which now accounts for most of our economy. Improving our understanding and measurement of productivity in the care and services sector is critical. We must ensure there is a focus on both quantitative outcomes and the quality of service delivery.

CEDA Submission to the Select Committee on Productivity in Australia

Productivity growth must be business-led. The role of government is to set the enabling factors to allow it to flourish. Governments should focus on how to incentivise better decision making, innovation and outcomes. They also should increase their efforts on evaluating and monitoring policies and programs to ensure they are meeting stated objectives and contributing to productivity gains. Better use of data and AI can both enhance measurement and enable better outcomes. Risk aversion, including as a result of robodebt, is currently inhibiting the use of AI and data sharing throughout the public sector. This reluctance needs to be addressed.

Productivity needs a long-term lens. Many of the reforms needed will require joint effort across the Federation. The ability to undertake reform is hampered by a lack of transparent, holistic, long-term budgeting and planning. This is especially so when reforms involve upfront costs, their benefits take time to emerge, or they flow to jurisdictions that did not bear the initial costs.

Recommendations:

1. The Parliamentary Budget Office should undertake whole-of-Federation intergenerational reporting and modelling. This analysis should incorporate the effects of key long-term developments relevant for budgets, including an ageing population, digital transformation and AI, changing global trade patterns and climate change.

2. Accelerate administrative data access and analytical capacity for program evaluation, particularly in key areas of social and Indigenous policy.

3. Build a data-first culture and capability that considers how data and AI can enable policy delivery and outcomes at the design phase, rather than at the time of implementation.

4. Leverage the Australian Centre for Evaluation to embed an evaluation culture within the public sector, across all levels of government and jurisdictions.

Productivity-enhancing priorities for reform

CEDA has identified three priority areas for productivity-enhancing reforms that will address these deficiencies and reignite innovation and investment:

1. Regulation and competition-policy reform

2. Improved skills and labour mobility

3. Tax reform

Regulation and competition policy reform

Australia’s regulatory burden

Australia’s regulatory and competition environment is not conducive to a more productive and dynamic economy. Recent CEDA research shows restrictive terms in Federal Acts have increased by around 30 per cent between 2003 and 2025. Ultimately, we estimate the impact to be a 39 per cent increase in regulatory restrictions that directly affect Australian industries over this period.

Our findings clearly show the increase in rules to which organisations must adhere, which creates additional costs and complexity to produce the goods and services that Australians want and need. This rising regulatory burden requires urgent review and reform to address regulatory inefficiencies

and ensure businesses are able to lead the way in innovation and productivity-enhancing investments. Our analysis does not measure the quality of regulation, and we acknowledge that there are positives from good quality regulations that drive better outcomes. We must address the quality, quantity and effectiveness of a wide range of regulatory settings.

Differences in regulation across states and territories also hinder productivity growth. Our report Towards a More Seamless Australian Economy highlighted that regulatory frictions are preventing firms from operating seamlessly across Australia. This restricts competition, raises costs, reduces choice, constrains labour mobility and impedes economic dynamism and productivity.

Reigniting competition policy

The period immediately following the introduction of the National Competition Policy in 1995 was marked by an acceleration in essential competition reforms across the economy and elevated productivity growth, which has since faded. Current efforts to revitalise the National Competition Policy are therefore long overdue. This renewal must take into account the ongoing evolution of local and global economies as well as the impact of changing competition conditions and broader policy objectives.

As a first step, the Australian Government should reignite the successful Seamless National Economy agreement that was active from 2009 to 2013. Unfinished business from the first national agreement should be prioritised, such as national occupational licensing and environmental approvals.

A new agenda should be agreed with emphasis on: land-use planning; enabling a national circular economy; data sharing across jurisdictions by default; and best practice procurement. The National Productivity Fund should be used to incentivise timely and consistent reform and performance monitoring.

Recommendation:

1. The Australian Government should deliver a renewed Seamless National Economy agreement between the Commonwealth and states and territories, building upon the 2024 agreement to revitalise National Competition Policy.

Improving skills and labour mobility

Workplace training

The skills, knowledge and ideas of Australia’s workforce are the building blocks of our productivity and future prosperity. CEDA research clearly shows that improving management skills and capability across the economy helps firms become more productive, innovative and profitable, increasing their ability to survive and thrive in uncertain environments.

More broadly, skills and training need to be improved across the economy. CEDA research has found that falling rates of workplace training and a greater focus on compliance-related training - rather than genuine skills development - are constraining workforce productivity. A greater emphasis on providing targeted workplace training will help to improve workforce productivity.

Dynamic management capabilities are also lacking in many Australian firms. Building these capabilities is a practical and effective way to boost the innovation and resilience of Australian businesses and an important step to deliver a more innovative and dynamic economy. While much of the change required to achieve this must be taken by firms, governments can use innovation policy to encourage business to build these capabilities, as well as adopting them in the delivery of government services.

Labour mobility

High levels of occupational licensing in Australia are contributing to reduced labour mobility and greater skills mismatch, which both impede productivity. Occupational licensing can restrict the ability of people to move to new jobs where people licensed to work in one state are not automatically recognised to work in the same occupation elsewhere.

Licensing presents a particular barrier to suitable employment for migrants who gained their skills internationally. CEDA estimated in Making better use of migrant skills that the value of lost wages from migrants working in jobs below their skill level was around $4 billion.

Furthermore, as decarbonisation and technological change drive significant and rapid changes in demand for skills, we need to support individuals and industries to retrain and adapt to new opportunities. A key plank of Australia’s social compact is ensuring that people affected by such change are enabled to build new skills and opportunities.

Improving migration outcomes

Australia has reaped enormous benefits from skilled overseas migration over a very long period. However, we can still improve the way in which we identify, attract and formally recognise the skills that our industries and communities need.

The introduction of the Skills in Demand visas in 2024 – for which CEDA advocated in its submission to the 2023 Migration Review – has streamlined skilled migration for higher paid occupations. However, more needs to be done to target lower paid workers in critical areas, such as aged care. CEDA continues to advocate for introducing an Essential Skills Visa. This would enable streamlined overseas migration into areas of greatest need and alleviate the acute worker shortages in these occupations, allowing us to deliver better quality services to the community.10 

Recommendations:

1. Australian Governments, businesses and enterprises should collaborate to improve the foundational skills that are needed to effectively enable workers to engage in training.

2. Embed dynamic capabilities training in existing government programs, such as the Industry Growth Program at federal level and business support programs at state level.

3. Review occupational licensing regulations, considering whether they meet stated objectives, international experience and recent technological developments.

4. Government support for decarbonisation and technological change should be proactive and targeted to workers and communities affected, rather than the businesses or organisations employing them. It should avoid creating disincentives to change ways of working, jobs or retraining.

5. The Federal Government should fast-track its commitment to longer term, evidence-based migration planning in collaboration with states and territories.

6. Improve recognition of international qualifications and work experience. Professional capacity should be assessed through direct assessment of competence.

7. Implement an Essential Skills Pathway as considered in the 2023 Migration Strategy. The pathway should initially target lower-paid occupations in the aged care sector and replace the Aged Care Industry Labour Agreement.

Tax reform

A competitive and fit-for-purpose taxation system is required to encourage a more productive economy. It’s well accepted that Australia’s current taxation settings are not meeting the needs of our economy and the challenges it will face in coming years. Comprehensive tax reform has been the subject of multiple inquiries and reviews and is now well overdue. Momentum for change is building, and we now have a unique opportunity to implement genuine structural reform of the tax system.

Time should be taken to build consensus around the objectives of reform, choices and trade-offs, and how they respond to future challenges and opportunities. Consultation should engage the community and seek to identify shared priorities and areas of agreement to build momentum for reforms that are able to be implemented and sustained.

A solid evidence base is equally important for successful tax reform. Evaluation of past tax measures provides an excellent guide, as do international examples of best practice.

Recommendations:

1. The Government should undertake comprehensive tax reform focused on improving incentives to work and investing in productive capacity. It should safeguard the overall progressiveness of the system and intergenerational equity, and address market failures. Individual components of the tax and transfer system cannot be considered in isolation. The simplicity, efficiency and equity of the overall tax system should guide the reform program.

About CEDA

The Committee for Economic Development of Australia (CEDA) is an independent, member-based policy think tank. Our members span industry, government, community and academia. Our research and advocacy are shaped by our Progress 2050 vision for long-term, sustainable prosperity for all Australians. Progress 2050 is centred on two pillars: a strong economy and a strong social compact working together. Productivity growth is central to achieving this vision and will underpin the wellbeing and prosperity of future generations of Australians.