Australia’s economic debate has intensified after Reserve Bank Governor Michele Bullock cited weak productivity as a key concern in her justification for holding interest rates steady — prompting the opposition to demand urgent action from the Albanese government.
In a decision that surprised markets, the Reserve Bank of Australia (RBA) left the official cash rate unchanged at 3.85 per cent on Tuesday. The move was not unanimous, with three members of the board reportedly arguing against a hold.
Speaking after the decision, Governor Bullock warned that inflation had not yet been “nailed”, despite underlying inflation falling within the RBA’s target range for the past quarter. One of her primary concerns was that wages were rising faster than productivity – meaning the economy was paying more without producing more.
Shadow Treasurer Ted O’Brien seized on the moment to accuse the Albanese government of neglecting the productivity crisis. “The priority of government has not been productivity,” he told the ABC. “We need to see growth coming from the private sector, not just the public sector.”
Mr O’Brien said the Coalition welcomed signs that the government might finally act and has accepted Treasurer Jim Chalmers’ invitation to participate in a productivity roundtable.
O’Brien laid out three core principles for improving Australia’s economic efficiency: stronger investment incentives for businesses and entrepreneurs, improved capability through upskilling and technological investment, and greater economic flexibility.
“We’ve got to make sure that we’re a nimble, agile economy,” he said.
He also criticised Labor’s focus on winding back tax concessions for ultra-high superannuation balances, arguing it was “the only idea being brought forward”.
But Treasurer Chalmers rejected the claim that Labor was not focused on productivity. Speaking to the ABC, he said productivity had been “a central concern” of the Albanese government from the beginning.
“This hasn’t just shown up in the last couple of years — it’s been a structural issue in our economy for decades,” Mr Chalmers said.
He pointed to the government’s focus on competition reform, workforce skills development, and targeted investments as evidence of a “substantial productivity agenda”, while acknowledging it was “not an area for quick wins”.
“The roundtable is the next step to keep momentum going,” he said.
Chalmers also defended the RBA’s decision to hold rates, saying Australians should take pride in the fact that inflation was now within the lower end of the RBA’s target range.
“That’s a good thing, and something the RBA Governor acknowledged yesterday as well,” he added.
As inflation stabilises but economic growth slows, the productivity debate looks set to dominate political and fiscal discussions in the months ahead.
