Had so much fun chatting with Greg Kaplan (Greg Kaplan) and Michael Brennan of e61 Institute about Australia's stagnant productivity growth and how to fix it. The 2010s saw Australia's weakest productivity growth in 60 years. It was in many ways a lost decade. And it's dragging on—unlike the... US, we haven't bounced out of covid with strong productivity growth. We discuss the extent to which this is being (i) caused by frontier-wide factors; (ii) caused by Australia-specific factors; and (iii) simply an artefact of how productivity is measured. We also go into a bunch of specific ideas, like: - why it could be better to densify Canberra than Sydney/Melbourne; - what should Albo do if he was bullish on AI; and - what we can learn from the stunning innovativeness of Australia's agricultural sector. And we discuss deeper questions around the role of government—as it's not really clear what levers the government currently has over productivity (at least for its *growth rate*). Links below. Enjoy! Timestamps: (0:00:00) - Introduction. (0:01:47) - Why has construction productivity stagnated—in Australia and the West? (0:08:38) - Can housing supply meaningfully grow just by improving construction productivity (without planning reform)? (0:12:50) - If construction and regulatory bottlenecks ease, what becomes the new supply constraint? (0:21:49) - Would densifying Sydney/Melbourne deliver big productivity gains—or should smaller cities scale? (0:29:48) - The most important limitations of GDP as a metric. (0:34:29) - Growth accounting in ~8 minutes: capital, labour, TFP. (0:43:04) - Is there a single “north-star” metric for policymakers? (0:47:12) - Should policymakers care more about TFP or labour productivity? (0:52:11) - Why revenue per worker is an imperfect proxy for firm-level productivity. (0:56:00) - Do these measurement critiques change what policy should do now? (0:58:25) - Stylised facts about the Australian economy. (1:04:01) - Status update on the health of the Australian economy. (1:06:43) - What would it take for Australia to be the richest country again? (1:11:23) - What growth rates are realistically achievable for Australia? (1:15:24) - How much GDP do we forgo over 10 years if weak productivity persists? (1:16:23) - Services, Baumol’s cost disease, and measurement. (1:29:18) - Lowest-hanging fruit for quality/productivity gains in services. (1:35:29) - Australia-specific vs frontier-wide causes of the slowdown. (1:39:51) - Best/worst Australian industries for TFP (i.e. “MFP”) growth over recent decades. (1:53:18) - Why has TFP slowed across almost every industry? (The chart behind the slowdown.) (1:59:41) - What is Australia’s “single most productive” company? (2:01:43) - Which industries have the biggest gaps between frontier and laggard firms? (2:07:53) - Is the median US firm more productive than its Australian counterpart, or is the US average skewed by superstars? (2:10:10) - What would Australian management look like if we converged on US practices? (2:13:15) - Why has the US—almost alone among rich countries—had strong recent productivity growth? (2:15:11) - How much of the US–Australia TFP gap is “culture”? (2:21:21) - Minimum reforms needed to restore 1–2% annual labour-productivity growth? (2:24:38) - Beyond Sydney/Melbourne: building (or scaling) new cities. (2:28:59) - If you were Anthony Albanese and bullish on AI, what would you do? (2:31:21) - How important is the CSIRO to Australia’s TFP? (2:33:02) - Three sensible reforms: tax; carbon pricing; road-user charging. (2:40:46) - Are the 1980s microeconomic reforms overrated? (2:44:33) - What levers reach the productivity growth rate—or is lifting levels the only game? (2:49:54) - Are we too concerned about the reform era ending? (2:56:12) - Most non-obvious lessons from the reform era.show more

Joseph Noel Walker

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