Productivity back to where it was two years ago: Productivity Commission
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The news: Australia’s labour productivity increased by 1% over the year to December 2025, meaning it’s back to “where we were two years ago”, according to Productivity Commission (PC) deputy chair Alex Robson.
Robson made the comments in the government economic think tank’s quarterly productivity bulletin for March 2026.
The numbers: Manufacturing (+1.7%), the information media and telecommunications (+1.5%) and agriculture, forestry and fishing (+1.5%) sectors showed the highest year-on-year labour productivity growth. Electricity, gas, water and waste services (-2.1%) saw the largest decline.
The context: In the bulletin, the PC highlighted that productivity gains are a “key input to our growth engine” but it has “limped along at under 0.3% a year since 2015; just a fraction of the 60-year average of 1.6% and well below the 2.2%” achieved during the mid-1990s to the early 2000s.
The report characterises that latter period as “a golden age for labour productivity, which drove strong growth in GDP per capita and living standards”.
This included a focus on opening Australia to global trade and overseas competition, increasing access to higher education, and removing barriers to the flow of capital and labour.
The latter included the removal of interest rate caps, welcoming foreign banks to increase competition, industrial relations reform to decentralise wage bargaining and strengthening competition policy more widely.
However, the pro-productivity reforms that drove the economic growth during that period “have run out of juice” and the PC has stressed that “no single lever will bring productivity growth back to its 60-year average”.
The PC said adoption of all 47 recommendations outlined its ‘five pillars of productivity’ reports released at the end of 2025 “would see sizeable net benefits for Australian productivity”.
This is based on “three key principles for productivity growth”:
- New ideas and the way we use them are the foundation for growth
- Investing in people and capital brings productivity dividends
- Governments should regulate with growth in mind
The source: Productivity Commission quarterly productivity bulletin March 2026
