The Chart That Explains Most of Australia’s Economic Decline

Описание: Stagnation! The 2010s witnessed Australia’s weakest productivity growth in six decades.

How much of the slowdown is homegrown? How much reflects the broader “great stagnation” plaguing the West?

And what would a credible new growth model for Australia—with its distinctive reliance on mining over manufacturing—actually look like?

To answer these questions and more, I spoke with two of Australia’s smartest economists.

Greg Kaplan is the Alvin H. Baum Professor of Economics at the University of Chicago. He is also the cofounder and chairman of e61, a non-partisan economic economic research institute in Australia.

Michael Brennan is the CEO of e61. He was previously chair of Australia's Productivity Commission and a Deputy Secretary of the Australian Treasury.

We discuss:
the forces behind falling construction productivity;
how to think about “Australia’s most productive company”;
where to find quality gains in the services sector;
what we can learn from the stunning innovativeness of Australia’s agricultural industry;
why we need new economic engines beyond the Sydney–Melbourne duopoly;
and much, much more.

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TIMESTAMPS
(00:00:00) - Introduction.
(00:01:47) - Why has construction productivity stagnated—in Australia and the West?
(00:08:38) - Can housing supply meaningfully grow just by improving construction productivity (without planning reform)?
(00:12:50) - If construction and regulatory bottlenecks ease, what becomes the new supply constraint?
(00:21:49) - Would densifying Sydney/Melbourne deliver big productivity gains—or should smaller cities scale?
(00:29:48) - The most important limitations of GDP as a metric.
(00:34:29) - Growth accounting in ~8 minutes: capital, labour, TFP.
(00:43:04) - Is there a single “north-star” metric for policymakers?
(00:47:12) - Should policymakers care more about TFP or labour productivity?
(00:52:11) - Why revenue per worker is an imperfect proxy for firm-level productivity.
(00:56:00) - Do these measurement critiques change what policy should do now?
(00:58:25) - Stylised facts about the Australian economy.
(01:04:01) - Status update on the health of the Australian economy.
(01:06:43) - What would it take for Australia to be the richest country again?
(01:11:23) - What growth rates are realistically achievable for Australia?
(01:15:24) - How much GDP do we forgo over 10 years if weak productivity persists?
(01:16:23) - Services, Baumol’s cost disease, and measurement.
(01:29:18) - Lowest-hanging fruit for quality/productivity gains in services.
(01:35:29) - Australia-specific vs frontier-wide causes of the slowdown.
(01:39:51) - Best/worst Australian industries for TFP (i.e. “MFP”) growth over recent decades.
(01:53:18) - Why has TFP slowed across almost every industry? (The chart behind the slowdown.)
(01:59:41) - What is Australia’s “single most productive” company?
(02:01:43) - Which industries have the biggest gaps between frontier and laggard firms?
(02:07:53) - Is the median US firm more productive than its Australian counterpart, or is the US average skewed by superstars?
(02:10:10) - What would Australian management look like if we converged on US practices?
(02:13:15) - Why has the US—almost alone among rich countries—had strong recent productivity growth?
(02:15:11) - How much of the US–Australia TFP gap is “culture”?
(02:21:21) - Minimum reforms needed to restore 1–2% annual labour-productivity growth?
(02:24:38) - Beyond Sydney/Melbourne: building (or scaling) new cities.
(02:28:59) - If you were Anthony Albanese and bullish on AI, what would you do?
(02:31:21) - How important is the CSIRO to Australia’s TFP?
(02:33:02) - Three sensible reforms: tax; carbon pricing; road-user charging.
(02:40:46) - Are the 1980s microeconomic reforms overrated?
(02:44:33) - What levers reach the productivity growth rate—or is lifting levels the only game?
(02:49:54) - Are we too concerned about the reform era ending?
(02:56:12) - Most non-obvious lessons from the reform era.