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Posted: 2023-03-17 02:28:25

A massive five-year review of Australia's economic policies says the nation should overhaul its education, immigration, climate and workplace laws, including expanding student loan schemes, scrapping certain visa classes and expanding the government's signature climate policy.

The Productivity Commission, which is the Commonwealth's main advisory body on the economy, was tasked by the government to examine at five-year intervals how to improve productivity and lift worker wages and leisure time.

It said if Australian productivity matched similar nations, the working week could be four hours shorter without any loss of income for workers.

One of its most significant recommendations is that the government's proposed "safeguard mechanism", which would force the nation's 200 biggest polluters to lower their emissions by 4.9 per cent each year, should be expanded to become the central program to reduce emissions.

Their proposal to reduce the threshold for inclusion would more than double the number of facilities captured and a wider net across which industries would be included.

The commission said addressing climate change in a cost-effective way would be one of the most important drivers for the Australian economy into the future.

Scrapped visa classes and free uni lectures among PC laundry list

Among more than 70 recommendations, the Productivity Commission (PC) recommended major changes to the education sector, such as reviewing price setting for degrees, expanding who can access study loans and requiring universities to provide all lectures online and for free.

In immigration, the report recommends shifting the employment visa scheme from list-based restrictions to instead set a minimum pay threshold that rises with age, longer temporary visa durations but with tougher pathways to permanent residency and changes that would allow employer-sponsored workers to switch employers more easily, allowing for temporary unemployment.

The commission also advised it was time to move away from taxes on petrol towards a nationwide road user charge, including charges for congested roads, as electric cars became more common.

The commission warned that due to the shocks of COVID-19, war, inflation and geopolitical tension, the task of improving productivity faced new challenges.

"Australia can navigate these challenges, but should do so with a clear-eyed view of our distinct economic structure and comparative advantages. Openness could look different, but it will be just as important," the reviewers wrote.

Lagging productivity threatens worse wages and longer working hours

Productivity has been its slowest in 60 years, and Australia has fallen in global productivity rankings over that time.

As Australians endure the ongoing cost of living crisis, the commission notes that higher productivity typically brings cheaper cost of living and enables more leisure time.

"In the long run, almost all increases in real wages are due to labour productivity improvements," the reviewers wrote.

Speaking ahead of the report's release, Treasurer Jim Chalmers said if productivity had kept pace over the past two decades, Australians would be earning on average $4,600 more each year.

"If we stay stuck on the current course, the PC projects future incomes will be 40 per cent lower and the working week 5 per cent longer," Mr Chalmers said.

The commission said if Australia's productivity matched Belgium — a country with similar GDP per capita — the Australian working week could be four hours shorter without any loss of income, translating to about one fewer day per week for each worker.

The reviewers said there was no easy way to predict how different measures would affect productivity, but that if the government adopted the PC's proposals it could "stack the odds in our favour".

Mr Chalmers said he has been digesting the thousand-page review since receiving it at the end of last month, but he flagged not every recommendation by the PC would be adopted by government.

He said "precisely zero" of the recommendations from the last five-yearly review were fully implemented by the previous government, and while he disagreed with some of this review's recommendations, there was also common ground with the government's agenda.

Commission weighs into climate stoush

The federal government is still fighting to win enough support for its signature bill to reduce carbon emissions by 43 per cent before the decade's end.

The Greens have so far refused to sign on unless new coal and gas projects are banned entirely.

The Productivity Commission did not go that far, but did recommend a significant expansion to the scope of the government's "safeguard mechanism".

Under the current scheme, only businesses producing more than 100,000 tonnes of carbon dioxide each year are captured — about 215 businesses.

The proposal would lower that threshold to 25,000 tonnes, the same threshold proposed for the Gillard government's carbon price, which would capture another roughly 300 emitters.

It also suggests better targeting electricity generators, which are largely excluded from the scheme, so that coal and gas-fired generators would be included.

Another recommendation would adjust rules for the transport sector so that a company selling petrol would be responsible for the emissions produced when a car or truck is driven.

It argued transport was taking up a growing share of Australian emissions, and including the sector would lower the cost of reducing Australia’s emissions as a whole.

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