More IR reforms will raise GDP by $26b says treasury paper

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More IR reforms will raise GDP by $26b says treasury paper

A paper by a top Treasury official which says labour market reform could significantly increase Australia’s GDP has been welcomed by a leading employers’ organisation.

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A paper by a top Treasury official which says labour market reform could significantly increase Australia’s GDP has been welcomed by a leading employers’ organisation.

Compare Australia and US

Australian Business Limited (ABL) says the paper, ‘Comparing Australia and United States productivity’ by Jyoti Rahman of the Macroeconomic Policy Division of Treasury, argues that labour market reform will contribute to narrowing the productivity gap between Australia and the US by about one-sixth.

ABL says a one-sixth reduction in the productivity gap with the US in 2002 would have raised Australia’s GDP per capita by about $1,300.

‘This paper confirms what Australian businesses have been saying and that is labour market reform will secure Australia’s economic future,’ said Australian Business Industrial’s Senior Workplace Relations Adviser, Minna Knight.

‘When productivity is lifted, income is lifted. When income is lifted, jobs are created and Australia’s economic prospects are strengthened. We all share in the benefits of increased national competitiveness.

‘The paper is clear that further deregulation of Australia’s product and labour markets could add up to $26 billion in GDP.’

More flexible labour market

Knight said that everyone shares in the benefits when Australia’s labour markets are more flexible, pointing out that real wages have increased by 14% over the past decade.

‘While the paper recognises there are many components to lifting Australia’s national productivity, labour market reform is essential to narrowing the productivity gap between Australia and trading partners such as the United States,’ she said.

She said the improvement in national income would not occur overnight, but labour market reform would make Australia more competitive over time.

‘Given our size, Australia cannot afford to run six separate workplace relations systems with over 4,200 awards with over 26,000 provisions,’ Knight said.

‘For most small businesses, the greatest impediment to employing more people is Australia’s current unfair dismissal regime.’

Knight said labour market reform is not the panacea for every issue, but it is ‘central to lifting Australia’s national productivity’.

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