Outgoing Westfarmers CEO Richard Goyder

Remember the productivity crisis? Back when economists, the Productivity Commission, employers and the Coalition agonised over why Australia’s productivity growth was so low and what industrial relations changes could be made to fix it? That was the crisis that vanished as quarter after quarter of labour productivity growth kept appearing in the national accounts after the Fair Work Act replaced WorkChoices.

In fact, a recent Treasury paper declared the whole idea of a productivity crisis was questionable:

“Despite concerns, Australia’s labour productivity growth over recent years is in line with its longer-term performance. In the five years to 2015-16, labour productivity in the whole economy has grown at an average annual rate of 1.8 per cent. This compares to an average annual rate of 1.4 per cent over the past 15 years and 1.6 per cent over the past 30 years.”

Well, hang on to your hats, folks — big business reckons there’s a new productivity crisis. Richard Goyder, the outgoing CEO of Wesfarmers — the company that owns Coles, home of the dodgy deal with the SDA to cut workers’ pay, the company that will slash penalty rates for its thousands of workers — declared that productivity was what was standing between workers and a decent pay rise. Speaking on a kind of farewell tour at the National Press Club yesterday, he said “we have to find ways of paying people more … the reality of a capitalist society is that’s not going to happen unless you get the productivity growth and the profit growth.” He went on to say “we desperately want to pay them more — because that’s good for them, their families, and their security. But you only can do that through growth in productivity”.

It almost breaks your heart, doesn’t it? Goyder longs to pay workers more … but the iron laws of capitalism prevent him.

At the same time, Andrew Thorburn, the head of NAB, which is sacking 6000 workers despite massive profits, said that until “you start to get productivity improvement and efficiencies, then we’re not going to really see real wage growth”.

So how’s productivity been faring recently? It’s true that the strong gains of the early years of the Fair Work Act have diminished. But in the last two years to June 2017, according to the ABS national accounts data, market-sector labour productivity grew by 2.9 points, according to the index for gross value added per hour worked in the market sector. That’s lower than 2013-15 (3.9 points) and 2011-13 (5 points) but well higher than growth during the WorkChoices period of 2006-08 (1.9).

And real unit labour costs, which links productivity and labour costs and measures the average cost of labour per unit of output, adjusted for inflation, have fallen in the last two years by 5.8 points in the non-farm sector compared to small rises in 2011-15. So productivity is still growing, and because businesses are refusing to give workers pay rises, and unions have been belted repeatedly by governments, businesses are getting more productivity for lower pay. Goyder and Thorburn’s “no pay rises til productivity rises” line is total rubbish.

As for Goyder’s claim about the need for profit growth as well, that was nonsense when Treasurer Scott Morrison said it earlier this year and it’s nonsense now.