For many Australians, the current economic climate may represent the peak of prosperity for the foreseeable future. The Reserve Bank of Australia’s recent interest rate cut was accompanied by forecasts predicting weaker consumer spending, modest pay increases, and declining business profits in the coming years. This outlook underscores concerns about falling productivity, which is expected to hinder economic growth and living standards across the nation.
The federal government has responded by making productivity the central focus of its upcoming economic round table in Canberra. While unions are advocating for initiatives such as a four-day work week and flexible working arrangements, business groups are pushing for a 25% reduction in regulatory ‘red tape’ by 2030.
Challenges in the Construction Industry
One of the primary challenges facing construction companies is the inconsistency of regulations across Australia’s states and territories. Tony Lombardo, CEO of Lendlease, highlighted the impact of these discrepancies on productivity. “In some states, it’s a flexible RDO [rostered day off] regime, and in other states, it’s fixed,” Lombardo explained in an interview with The Business host Kirsten Aiken.
This inconsistency means that flexible regimes allow sites to remain operational, while fixed regimes necessitate complete shutdowns, affecting overall productivity. Lombardo also called for more harmonization of building regulations, noting that frequent changes complicate compliance and execution.
Moreover, Lombardo pointed to Australia’s aging workforce and the shortage of skilled labor as significant concerns. “Post-COVID, we had a lot of people leave the industry, so I’d love to see initiatives around apprenticeships,” he said. He suggested that migration could be a solution, advocating for policies to attract skilled labor to the construction sector.
Regulatory Burdens on Small Builders
Andre Ransom, managing director of Sydney-based Kestrel Building, emphasized how certain regulations are inflating costs for smaller builders, which in turn raises property prices. One issue he identified is the generous redundancy payouts for construction employees, which differ from those in other sectors.
“If an employee who has worked for you for less than a year decides to resign and work for another building company, he’s entitled to redundancy unless he has engaged in gross malpractice,” Ransom said. “I know of no other industry with rules like that.”
In most industries, redundancy payouts are only applicable if the employer terminates the role, typically after a year of service. However, construction employees can receive redundancy payments even if they resign voluntarily, due to broader definitions in the industry.
“To run construction costs a lot of money, and so many have gone bust. It’s never been harder to try and grow,” Ransom added, highlighting the financial strain on builders.
Health and Productivity: An Overlooked Connection
Matthew Britland, a former nurse and current consultant in the drug development industry, offers a different perspective on productivity. He argues that health problems are significantly affecting workplace productivity, as employees with preventable diseases take extended leave.
“Governments tend to approach healthcare as if it were a ‘cost’, as opposed to an ‘investment’, and often doesn’t see the long-term productivity gains,” Britland stated.
He criticized the slow approval process for new treatments in Australia compared to regions like the United States and Europe. After the Therapeutic Goods Administration (TGA) approves a new medicine, the Pharmaceutical Benefits Advisory Committee (PBAC) must decide on taxpayer subsidies, a process that can take around 680 days.
“Australia is one of the slowest jurisdictions to reimburse new medicines. There’s a gap of around 680 days between when the TGA approves something, and when the government decides to foot the bill for it,” Britland noted.
This delay forces patients to rely on older, less effective therapies, resulting in more time off work and reduced productivity. Britland emphasized that viewing healthcare as an investment could lead to better health outcomes and increased productivity.
The discussions at the economic round table and the perspectives from various industry leaders highlight the multifaceted challenges facing Australia’s productivity. As policymakers and business leaders convene, the focus will be on finding solutions that balance regulatory efficiency, workforce development, and health investment to drive sustainable economic growth.
