You could call it the mystery of the disappearing productivity crisis. Last week's national accounts for the December quarter confirmed that, if we ever really had an underlying problem with weak productivity improvement, we don't have one now. By now, that's not such a mystery. No, the puzzle is why the people who made so much noise about the supposed productivity crisis show little sign of having noticed its evaporation....
Call me cynical, but it makes me suspect all the tears shed over productivity were little more than cover for an exercise in big-business rent-seeking. Shift the rules in my favour and it'll do wonders for the economy....
Big business is wedded to the happy notion that productivity improves when governments do things to make business's life easier. If these guys were a bit better versed in economics [as opposed to rent-seeking] they'd know the truth is roughly the opposite: productivity improves when governments either do things, or allow things to happen, that make life tougher for business.
So why had productivity improved? What did the Government do?
What the Gillard government did was do nothing to lower the high dollar - not that there was anything sensible or effective it could have done - and limit the budgetary handouts to only part of manufacturing industry.Gittins quotes Reserve Bank governor Glenn Stevens:
The result was a lot of pressure on export-and import-competing industries to raise their efficiency (or, at the very least, cut costs) or go under. As well, a lot of other industries, including retailers and much of the media, have been subject to pressure on sales and profits coming from the digital revolution and structural change.
As we go through a period of transition from mining-led growth to stronger growth in the rest of the economy, he said, ''the pressures to adapt business models, contain costs, increase productivity and innovate will remain. But such adjustments are actually positive for longer-run economic performance.''Gittins concludes his column with a great piece of advice:
Moral: Don't get your economics from overpaid chief executives - or crusading newspapers.