"Just as we should encourage dynamism through productive entrepreneurship in private markets, we should work to remove the destructive entrepreneurship of rent-seeking," Mr Brennan will say.

"Business also has a role to play by advocating for good general economic policy, rather than specific measures aimed at individual preferment."

Rent seeking got to go

Mr Brennan identifies that 40 years ago there were "substantial allocative inefficiencies" in the Australian economy making productivity reform more obvious, but now there are only "some" in selected markets like energy or superannuation, and areas like stamp duty or restrictive land use planning.

While he suggests changes to traditional areas such as zoning, stamp duty, road user charges, public transport reform and quality infrastructure provision – many for which are state based – he says a new form of reform will be needed that sparks greater dynamism in the private sector.

"For all the success of past waves of reform, the future economic policy agenda will necessarily look a bit different. And it won’t be helped by nostalgia or pessimism."

"It is likely that the bigger challenge for the Australian economy today is one of dynamism: the capacity to generate new ideas, products, business models, production techniques and diffuse them quickly through the economy."


"Firm level data suggests the dynamism of the economy – as measured by net new business entry and the rate at which workers switch jobs – has slowed.

"Dynamism, and the policies that might contribute to it, are much harder to model. They aim to foster economic progress partly through increased entrepreneurship, the generation of new products and new business models."

He said the federal government's introduction of the Consumer Data Right was an important reform for encouraging such entrepreneurship and that the public service might also need some reform to improve its own productivity.

"One of the hardest business models to change is that of the public sector."

"[In family services] it’s fair to say that, collectively, government has not covered itself in glory. We found that between them, the Commonwealth and Northern Territory Governments spend about $538 million per annum on a range of services aimed at helping families and protecting children, but they do so through nine different agencies, 700 grants and 500 service providers. They make these funding decisions in relative isolation, leading to fragmentation, inefficiency and a good deal of confusion on the ground."

Reserve Bank governor Philip Lowe has been pressuring both business and government on reform and encouraged them to use an extended period of cheap credit to lower excessively high return hurdles and start investing in productive projects.

Productivity reform needs lifting

While some business leaders such as CSL chairman Brian McNamee, Wesfarmers' Rob Scott, SEEK's Andrew Bassat, Macquarie's Shemara Wikramanayake and UBS investment banker Matthew Grounds agree with the need for greater investment at record low interest rates other business leaders have not, including Tabcorp chief executive David Attenborough who argues risk is too high.


Business Council chief executive Jennifer Westacott said last week that while she supported the government maintaining a fiscal surplus more needed to be done to reform education and enterprise bargaining systems.

Mr Brennan said that while productivity reform was getting harder to model the importance of lifting it was "not trivial".

"Productivity growth has done wonders for Australian living standards. In 1900 we estimate that it would take an average worker over 500 working hours – a couple of months – to earn enough to buy a bicycle, which was then a staple form of transport. For an average worker in the 21st century, it would take about a day."

"I mention this only to emphasise that the dividend from economic progress is not trivial, lest anyone want to dismiss continued productivity growth as a worthwhile policy goal," Mr Brennan said.

He says that while slowing productivity growth has become a global phenomenon Australia is in a good position to weather it compared to other countries.

"We have among the strongest fiscal positions and the most redistributive tax transfer system in the OECD – helped by two Aussie inventions: compulsory superannuation and the income-contingent loan."

"We face neither the fiscal and demographic problems of the Eurozone, the inequality of the US or the stagnation of Japan."

"Over [the last] 30-year period, our real per capita GDP has out-performed all of the G7 economies, and our incomes have risen back to being well above the OECD average. Income inequality in Australia has changed very little over the last 30 years."