THE best way to have lower taxes and better services is to build a more productive economy.

Here's the Coalition's six point plan: first, encourage more people into the workforce; second, make public institutions more effective and responsive; third, cut red tape; fourth, improve competition rules; fifth, get greater value from infrastructure spending; and sixth, reform workplace relations to encourage higher pay for better work.

Productivity gains mean more output for the same input or more prosperity for the same effort. As Reserve Bank governor Glenn Stevens has said: "Everything comes back to productivity. It always does."

Over the past two years, GDP per hour worked has not grown at all. To improve productivity, the Coalition will provide incentive payments to employers who take young people and seniors off welfare into work.

We'll extend around Australia the welfare quarantine arrangements that the Gillard government has put in place in the Northern Territory. We support the new impairment tables that the government has flagged for people seeking the disability pension. Unemployment payments should be suspended for young people where work is reasonably available.

The Coalition supports a fair dinkum paid parental leave scheme because women shouldn't be forced to choose between a decent income and more children. Paid parental leave should be as much an entitlement as sick pay and holiday pay. This is a long overdue reform that is pro-family as well as pro-work.

Over time, community- controlled hospitals and schools will mean better returns for each dollar of spending and will be vital in improving productivity.

When introducing the Fair Work Act, the Prime Minister claimed that it would be "good for productivity" but the truth is very different.

An Australian Industry Group survey reported that 74 per cent of large businesses had found the act made negotiating productivity improvements harder. The act should accommodate more flexible working arrangements and the Productivity Commission undertake the promised review of its operation.

The Coalition intends to manage a stronger economy, run a better government and foster a fairer society because that is the best way to restore hope, reward and opportunity for all.

Originally published as How we'll smarten up the economy