Without broader structural reform, emphasis on productivity growth might be a misstep on the path to improving living standards, writesBronwyn Kelly.

AUSTRALIA'S TREASURERJim Chalmersis prioritising productivity growth and its inspiring lots of supportive commentary in progressive news sites.

There are reasons why it should, but does prioritising productivity gains over, say, restoring essential services really help us restore living standards in a world where there are limits to growth? This question isnt being asked, but we can get a sense of the dilemma and a possible way through it if we compare some of the commentary.

Take, for example a couple of articles recently published: one by former finance department secretaryMichael Keating, favouring afocuson restoring growth in productivity and another by academic and environmentalist DrMark Diesendorf, promoting theneedfor a steady state economy.

These two writers work from very different economic starting points Keating from a position that doesnt question whether productivitygrowthand continual growth of GDP are good and necessary things and Diesendorf from a position that questions whether endless economicexpansionis even feasible, let alone a good thing.

They are diametrically opposed to each other but the juxtaposition of the two articlespoints out the strengths and weaknesses in some of the prescriptions currently being proposed for curing our economic ills.

Private sector does not operate in public interest

Keatingstates:

This is a generally accepted tenet of economics, but its a mirage.

This is because in our economy, where the private sector dominates production, our living standards are now too heavily dependent on the faith that profit-driven employers will be naturally well-motivated in favour of the public interest.

We assume employers can be relied on to not simply pocket the financial gains afforded by productivity improvements and then put prices up anyway. Employers would get a double gain and employees would get the very wage stagnation and inflation we were trying to avoid. Productivity gains, when in the hands of private employers, are not all theyre cracked up to be.

What if there is no productivity crisis in Australia and all of the concerns about the dismal level of productivity are misguided and even wrong?

Keatingstates:

If this is the case, then it could be that at least part of the blame lies in too heavy a dependence on the idea that the private sector will act in the public interest.

The reality is that in this economy, the capacity of the public sector to place sufficient competitive pressure on the private sector to behave fairly on wages and prices has been heavily reduced by the privatisation of public services and assets. As such, a theory that productivity gains will lead to raised living standards is no longer reliable.

The pressure from the presence of a competitive public sector in the economy for the provision of services and infrastructure moderates the excesses of private business.Removethat pressure, and there is no incentive for the private sector to share the benefit of productivity increases with workers in wage rises and stable prices.

Withdrawal of the public sector from large parts of the market in essential services and infrastructure provision over the last 25 to 30 years is a big part of the reason for wage stagnation and probably some of the recent inflation, too. Now that the government sector is not participating as much as it should, we have a grossly lopsided economy so much so that the new Labor government will find it difficult or impossible to ensure that the benefits of any productivity gain it might squeeze out of the economy overall can be distributed fairly.

Whats the point of productivity gains and all the work Australians need to do to achieve them if they simply exacerbate inequality?

Increasing production means faster resource depletion

To ensure that any benefits of productivity gains are shared fairly, the priority ought not be the gains themselves but the economic composition in which the gains are made.

Productivity gains made in an economy which doesnt prioritise naturalresourceconservation and human resource optimisation are not gains at all. They amount to losses of natural and social capital. They amount to an unsustainable economy.

By some measures of productivity, the government might claim victories here and there, but since these measures dont incorporate the cost of resource depletion, they wont deliver a net economic benefit, much less fair shares of it.

The economy is a dominant issue in the Election. From now until polling day, Independent Australia will outline some key facts on the economy that put the kybosh on many of the myths, lies and distortions being peddled in the election campaign.

This is where Australias economy has arrived, and its incredibly inconvenient that it has come at a time when it is painfully obvious we are consuming the things we produce at a rate faster than the resources we use to produce them human and natural can be renewed.

Production in Australia is far too heavily dependent onnon-renewablesources of energy. It is far too skewed towards excessive water consumption and far too reliant on workers whose education has not equipped them for the right type of production ecologically sustainable production.

The whole economy is skewed towards ever-increasing consumption of ever-dwindlingresourcesthings that threaten our survival rather than maintain our well-being. So now, even as Michael Keating might call for productivity increases within the current economic composition on a Thursday, Mark Diesendorf is forced to point out the dire consequences of our current economic composition and the consumption patterns it has generated on the Friday of the same week.

Adding it up, its apparent that focusing on increasing productivity is only going to mask an increase in unnecessary production and not increasing efficiency in resource consumption. It is more likely to destroy our base of renewable resources and cause us to shoot past all sustainableplanetary boundariesfaster than we are already.

Australians should be the prime beneficiaries of economic reform

If thats correct, then the government could consider a slight shift in priorities lowering the focus on productivity growth (except perhaps in renewable energy) and elevating the priority of another suggestion favoured by Keating. He suggests raising more revenue to finance the services that will add more to our well-being. This will require a two-pronged strategy.

One prong involves a plan for recomposition of the economy. It would mean making room for the restoration of the public sector in provision of essential services, especially in health, education, housing, aged care, childcare, employment placements, pollution control, landcare, renewable energy and any other services essential to well-being.

A second prong builds on Keatingssuggestion:

But if this is to be raised without a sacrifice of well-being for Australians, then a prior task is to ask Australians about what they think is essential for their well-being. Who knows? We may find out that we dont need to flog ourselves and our natural environment to death to establish the essentials of our well-being and security. The bill neednt be as big as Keating thinks, especially if Australians feel we neednt spend on things likeAUKUSandfossil fuelsubsidies.

Getting the order of these reforms right is important because the government will not achieve the tax increases necessary for these essential services until Australians trust it to ensure that they are the prime beneficiaries.

Diesendorfwrites:

The universal services Diesendorf wants, however, can only be achieved with the tax increases Keating wants. This is where their projects merge happily but both need to recognise that tax reform is very unlikely to be supported by Australians unless everyones financial security is guaranteed at the same time.

That means its time for auniversal basic income, the benefits of which can be readhere. Nothing else will encourage Australians to trust that this Government will be dealing fairly with them in tax reforms.

DrBronwyn Kellyis the Founder of Australian Community Futures Planning (ACFP). She specialises in long-term integrated planning for Australias society, environment, economy and democracy, and in systems of governance for nation-states.

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