Speakers: Business Council Chief Executive Bran Black
Topics: 2026 Intergenerational Report, productivity, artificial intelligence
E&OE
Bran Black, Chief Executive: I want to talk about the Intergenerational Report that’s been released today. Let me start by saying it is a really good thing that Government releases this report every three years. It’s really important because it gives us the capacity to forecast a long way into the future. Now, it doesn’t tie us up in terms of that particular forecast. We’ve always got the capacity to change our trajectory, but having on a rolling basis and a frequent rolling basis every three years the capacity to look forward is really very useful.
I did also want to make the point that it’s a 352-page document. We have only started to go through it in detail, but there are some key points that I wanted to make at this early stage.
The key point is this: this report is a burning platform for the comprehensive productivity-enhancing reform that this country needs. The reality is that real wages have only really changed marginally over the course of the last few years, and this report explains why.
Our productivity growth is stagnant, but we will not turn it around unless we’re prepared to invest in the comprehensive productivity-enhancing reform that our country requires. Let me give you a real-world example of how this works. If you think about the 2023 edition of the Intergenerational Report, it projected that per capita GDP would be almost $102,000. So $102,000 per man, woman, and child.
The latest ABS data shows that the per capita GDP in 2026 is $100,000. So, just in the space of three years, we’ve seen every man, woman, and child go backwards $2,000 against the assumption that was made in 2023, and think about what that means in real terms every day.
Think about what that means for a young person; they might be at university or they might be an apprentice. What $2,000 can do in terms of their study textbooks or the equipment that they need to buy. Think about it in the context of a young family struggling to get ahead, paying their mortgage, paying for the rent, paying groceries, paying school fees, paying for the petrol once a week.
$2,000 makes a difference, and we’ve seen that decline in only the space of three years, and that decline is largely attributable to the fact that our productivity assumptions that were made then have proven incorrect.
So let’s talk a little bit about those productivity assumptions that we’re seeing in this report. This report assumes that productivity will increase by 1.2 per cent a year moving forward. That is a challenging assumption to make based on the performance of the 2020s so far. We saw in the 2010s, that that decade represented the lowest decade of productivity growth on record, with growth of 1.2 per cent.
As things stand right now, for the first six years of the 2020s, productivity has declined by 0.1 of a percent a year. I’ll say that again: it’s declined by 0.1 of a percent a year. What that means is that it is exceptionally challenging for us to contemplate increasing our productivity.
Now I know that the Government is saying that AI will carry a significant burden in our attempts to up our productivity growth rate. We certainly hope that that is the case, but the reality is we can’t afford to put all of our productivity eggs in the AI basket. We must invest in the comprehensive reform that we know makes other countries competitive, and which we know, if we undertake the same reforms, will also make Australia competitive to attract the investment that ultimately means we can lift productivity and raise living standards for everybody, and put that additional $2,000 back in the pockets of people who are doing it tough.
Journalist: Bran, one of the things in today’s report is that Australia is getting older and it’s happening faster than was forecast three years ago. There’s challenges for the workforce spelled out in that, there’s challenges for the budget spelled out in that.
One of the things the report says, though, is a security blankets in ongoing migration, and that migration would help to soften those impacts of an ageing population. What did you make of that, and do you have concerns considering the current political debate on migration?
Bran: Well, it’s a really good question, and there is some data that I wouldn’t just mind reading if I can. One of the points that the report makes is that the old age dependency ratio, which is the number of 65 plus year olds for every 100 people who are in that working age category, has changed significantly over the course of the last 40 years, and will continue to change over the course of the next 40 years.
To give you the figures, in 1985, that figure was 15. It’s now about 28, and by 2066, it’s projected to be 40. So that means that, as you say, you’ve got far fewer people proportionately working to fund proportionately more people who are living older, which is a good thing, but who have increasingly complex and costly care needs.
What this points to is that if we want to be able to continue to provide this type of service, we need to be able to grow our economy, and it’s hard for us to grow our economy when we know that we have significant skills gaps. We have at the moment one in three occupations reporting a skills gap. So our starting point for any discussion on migration is not what should the number be or the NOM be, it is rather what are the skills we need, and then considering what is required to deliver the housing, what is required to deliver the infrastructure, and so forth that supports that skill set, so that we can grow our economy.
Journalist: Bran, you mention some of the efficiency and productivity moves that other countries are doing. In layman’s terms, what can we do to prevent or make up that $2,000 drop that we’ve seen?
Bran: The key thing that I would point out is that other countries are aggressively taking steps to make their economies more productive, so that they can secure the quality of life that they want their people to have. Now, you get productivity by increasing business investment, and you get business investment by having more competitive settings. What we’re seeing consistently is that there are some key areas where Australia ranks really poorly.
On our own analysis within the BCA, we rank poorly on regulation, especially, 37th of the 42 countries that we measure against, and on tax we rank 38th. We have really uncompetitive settings in terms of regulation and taxation. What’s more concerning is that we see countries that are directly our competitors, day-to-day cap for capital, like Canada, like the United States, like the UK, like New Zealand, getting ahead of us on those key metrics.
And if you look at just last week, the Canadian Prime Minister announced what he is calling, and I quote, the Productivity Mega Deduction. What that means is that 65 per cent of all business assets will be eligible for full depreciation in the year in which the cost is incurred, we have nothing like that. It’s that type of change, it’s that type of reform that we’re going to need to undertake in order to just keep up with the game, let alone get ahead of it.
Journalist: Just on those competitive tax settings, one of the things in this report that spelled out is income tax will grow beyond the already quite large share of the tax burden that it has, it will go further because of that ageing population. Is it a reality that business is going to have to shoulder more weight to avoid income tax becoming the sort of sole funder of the budget?
Bran: Well, I think that question rests on whether or not we’re able to grow our economy. So, if we don’t grow our economy in the way that we would like to, if we can’t lift productivity, if we can’t exceed the projections that are set out in the IGR, then there is a risk that the cost of increased burdens associated with care and so forth means that the Government will be faced with very difficult choices.
It can consider increasing debt, it can consider reducing the quality of services, it can consider, as you say, increasing taxes, or, as I say, it can grow the economy. To do that, obviously, we’ve got to make sure we have the skill set, but we also need to invest in the settings that underpin our capacity to secure more business investment.
We know that for every dollar in GDP that we’re able to increase by, that yields about 25 cents to Commonwealth tax coffers. If we can grow the economy, we have the capacity to increase our tax pool.
Journalist: Given what you say about productivity, how realistic are the economic assumptions in this report?
Bran: Well, it’s a very challenging proposition to be thinking forward in terms of a 1.2 per cent annual productivity growth rate. Now, that doesn’t mean that we can’t do it, but we do want to make sure that it goes right.
I mentioned before that AI presents enormous potential in that respect, and I would hope, and I dare say, the Government hopes that we’ll be able to deliver productivity growth on an annualised basis of more than 1.2 per cent, simply from AI, moving forward.
But with every other country that we compete with for investment, also looking to secure productivity uplift from AI, we need to do that and some, just like they are doing, in order to make sure that we can continue to deliver the quality of life that we are fortunate enough to enjoy now, and which we want our kids to enjoy too, and that takes us back to the point about the type of reform that’s needed to drive improved productivity.
We can deliver a productivity growth rate of 1.2 per cent, but on our present trajectory, that is exceedingly challenging.
Journalist: Unlikely?
Bran: Well, if you look at the productivity that we would need to deliver in this decade, just to take this decade’s productivity average to 1.2 per cent a year, we’d have to, for the next four years, see productivity increase by 3 per cent a year.
Now we haven’t seen that type of productivity growth since the turn of the century, so it is exceedingly, exceedingly challenging for us to contemplate this decade being a decade in which we can deliver productivity growth of 1.2 per cent. But we should strive to do that.
Journalist: On that productivity, you mention, the turn of the century … computing …. the Government now sees AI as being some sort of similar force? What do you make of that assessment? Do you think it can it can do the same thing that happened at the turn of the century?
Bran: There is no question that AI has enormous potential to lift productivity. But being entirely honest, the feedback that I get from my members and also from businesses around the country, and frankly from overseas, is that in some respects there’s been a bit of a rush to introduce AI into their businesses without thinking through necessarily what are the key problems that they wish to solve and how will AI help in the solving of those problems.
It’s the businesses that take the time to think through and to work with their workforce in the course of doing this, to think through that challenge of what is the problem that we need to solve that derive the most productivity benefits. So my advice is that if we can take that very deliberative approach to how we introduce AI, we’ve got a much better scope to deliver overall productivity enhancement across our economy.