Better than expected GDP result can't hide Australia's productivity problem

Following the release of the latest GDP figures, CPA Australia Business and Investment Lead Gavan Ord said the stronger-than-expected economic growth recorded in the June quarter should not distract from Australia's ongoing productivity challenge.

Though the economy expanded, the growth was driving largely by Australians working more hours, alongside higher exports and increased spending in selected sectors, while productivity continues to lag.

“While the headline GDP figure is slightly better than expected, productivity remains the economy’s weak spot. Output per hour worked is lower than it was a year ago – we are working more, not working smarter,” Mr Ord said.

Stronger demand for electric vehicles and higher coal exports also contributed to growth.

"The real story behind today's figures is Australia's continuing productivity problem. Without stronger productivity growth, it becomes more difficult to lift wages sustainably, improve living standards and strengthen long-term prosperity,” Mr Ord said. 

He said governments should prioritise reforms that reduce unnecessary costs and barriers facing businesses.

"Getting the economy back on track requires a laser-like focus on productivity-enhancing reform. That means reducing unnecessary red tape, creating a more business-friendly operating environment and ensuring our tax system supports investment and growth.

"AI has the potential to be a significant driver of future productivity growth, as Treasury has recognised. However, AI alone cannot solve Australia's productivity challenge. Structural reforms remain essential to improve our tax and regulatory settings and give businesses greater confidence to invest, innovate, create jobs and expand.

"Australia needs policies that encourage business investment, innovation and entrepreneurship. Stronger private sector activity and higher productivity are essential to improving living standards and securing our long-term economic future.

Mr Ord said a stronger GDP result is encouraging, but Australia will not become more prosperous unless productivity starts moving again.