Jim Chalmers to announce $900 million fund for states to boost competition and productivity

Written by: Michelle Grattan, Professorial Fellow, University of Canberra

Treasurer Jim Chalmers will announce a fund of up to $900 million for states and territories to improve productivity and competition, in a Wednesday speech urging an all-out effort to tackle one of Australia’s biggest structural economic issues.

States will be able to choose from a “menu of options”, with Chalmers pointing to streamlining commercial planning and zoning, and removing barriers that inhibit the take-up of modern construction methods.

Speaking to business economists, Chalmers will also outline findings from the Productivity Commission’s modelling, which he commissioned, on the impacts of revitalising national competition policy.

“The benefits on offer are substantial, if not staggering,” he says in his speech released in part ahead of delivery.

The commission’s modelling indicated a reinvigorated national competition policy could increase Australia’s GDP by up to $45 billion annually and cut prices by 1.45 percentage points.

“That GDP boost represents about $5,000 per household, per year,” Chalmers says.

He says “there is no more important structural problem in our economy than productivity – no higher priority for reform”.

In 2022 treasury downgraded its assumption for long-run annual productivity growth from 1.5% to 1.2%.

Chalmers says new treasury analysis attributes half of this downgrade to Australia’s changing mix of industries. These days more people are working in services, where productivity grows more slowly.

Flat labour productivity in 2023-24 “partly reflects the enormous gains we’ve made and preserved in the jobs market”.

Productivity and employment growth. Jim Chalmers Press Release

Progress on improving productivity will need commitment from federal and state and territory governments, Chalmers says.

He will meet state and territory counterparts on November 29.

While not all the Productivity Commission’s reforms will be adopted “we want to make meaningful progress where we can”.

“I expect we’ll start by fast-tracking the adoption of trusted international product safety standards and developing a general right to repair – both Commonwealth-led reforms.” The “right to repair” involves access for households and businesses to repairs at competitive prices and repair information.

“Both involve small implementation costs but provide significant benefits in the order of $5 billion over the next ten years for product safety, and over $400 million per annum for right to repair.”

The head of the Productivity Commission, Danielle Wood, interviewed on The Conversation’s politics podcast ^[1] recently, said if the government could revitalise national competition policy effectively, “if they can actually get the states to come to the table and agree on areas where we can reduce regulatory and other barriers to competition across the country, that’s a really important lever for getting economic dynamism moving again”.