ACT Labor MP Andrew Leigh claims falling rates of productivity and a lack of competition is stagnating growth. Picture: James Croucher
Low productivity and a lack of competition could cost the economy future growth prospects.
In a speech delivered at the Australian National University’s Gruen Lecture, ACT Labor MP Andrew Leigh claims falling rates of productivity and a lack of competition is stagnating growth and could make the nation’s economy a laggard compared to the rest of the world.
The assistant minister for competition, charities and treasury highlighted the number of workers starting a new job had fallen and the rate of new start ups had declined.
Both of which is he says point to a less dynamic economy.
“Low productivity growth and declining competition are key long-term issues facing the Australian economy,” an excerpt of his speech reads.
“More work is needed on this topic from both the public sector and academics to better understand why market power has increased and therefore whether any policies can and should be used to boost competition and productivity growth.”
Productivity growth in Australia has slowed since the middle of the 2000s. The 30-year average for productivity growth was 1.6 per cent, while the average over the past two decades stands 1.2 per cent.
Slower growth Dr Leigh warns will lead to poorer outcomes for pay and a drop in buying power.
“Slower productivity growth means lower real wages and less buying power for households,” he said.
“It constrains the ability of the budget to build infrastructure and help poor people here and overseas.”
Figures based on analysis from Treasury outline a declining rate in the number of new businesses being started in Australia.
Dr Leigh believes this is partly due to a consolidation of market power which is stifling competition.
Healthy competition is needed to boost productivity and to push down prices for goods and services.
“Monopolists tend to charge higher prices and offer worse products and services,” he said.
“If they have plenty of cash on hand, they might figure that if a rival does emerge, they can simply buy them out and maintain their market dominance.”
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