Speaking on NAB’s Morning Call podcast, Andrew Irvine said the biggest issue Australia has is lack of productivity.
“That’s the first, second and third issue that we face. And that’s manifested across the board,” Irvine said.
He warned that Australia’s productivity problems are also making the country less attractive to global mining and energy companies, with concerns over sovereign risk and unclear regulations.
“You can also translate that to the mining and energy sectors. We’re seeing Australia becoming a little bit less attractive on a global basis because companies feel they have a bit of sovereign risk with Australia. They don’t know what the rules of the game are,” Irvine said.
“That’s not good. Australia is so blessed with the resources that the world needs to grow and to frankly decarbonise, and we should rightfully be the top of the pile when global organisations and miners are looking to make investments, and right now we’ve fallen down the pecking order.”
The challenges are compounded by damaging legislative changes, regulatory decisions, falling commodity prices and increasing competition for international capital.
The Chamber of Minerals and Energy WA last month urged the government to act, noting that doing business in Australia has become more difficult at a time when new projects are crucial.
“The reality is Australia is becoming a more difficult place to do business at precisely the time we can least afford to be putting up roadblocks to new projects,” said acting CEO Adrienne LaBombard last month.
“Streamlining end-to-end approval processes should be the highest priority for the Australian government to unlock investment in transformational projects, regardless of industry.”
NAB’s latest Monthly Business Survey revealed a drop in overall business conditions in January, with trading and profitability weakening.
Conditions were mixed across industries, with a large decline in mining and smaller declines in retail, finance, business and property, and recreation and personal.
Reflecting on the survey, Irvine acknowledged the challenges many businesses are facing.
“Businesses are getting by, as are consumers, but it’s tough,” Irvine said. “Confidence is going to be important here because it drives investment and hiring decisions.”
Irvine said he hopes the anticipated rate cut on Tuesday will help boost business confidence.
“If we do see a 25 basis point reduction next week from the RBA, I think that will continue to add to confidence.
“I continue to be optimistic for Australia and feel like 2025 will be a better year than 2024.”
Would a DOGE-like department fix things?
Recent suggestions have been made that Australia could establish its own Department of Government Efficiency (DOGE) to boost productivity, especially as government spending is ballooning while the private sector remains in recession.
In a paper published last month, former chief economist at the Department of Foreign Affairs and Trade and current non-resident fellow at the Lowy Institute, Jenny Gordon, wrote that while taking an axe to government can sometimes shift the productivity dial, in some instances, it can have the oppositive impact.
Using entitlement programs – government’s largest expenditure after defence – as an example, Gordon cautioned that while spending cuts could offer savings, the real impact on productivity depends on whether costs are genuinely reduced or merely shifted, and whether investment is directed towards productive capital.
Deregulation, on the other hand, while a popular measure, must be evaluated carefully, she said, highlighting that some regulations exist to mitigate negative externalities, and abolishing them could ultimately harm long-term productivity.
“Perhaps the best way to improve productivity is to remove the rose-tinted glasses on DOGE-like approaches and find a way to hold political parties to account on the long-term impacts of their policy choices,” Gordon said.
