When Australians go to work, on average, they only produce around 85% of what workers in the US produce. Academics and policy wonks have spent a lot of time debating whether this is due to our remoteness from the world economy, our proportionately smaller R&D effort, or our highly regulated industrial relations (IR) system, among other factors. This debate is reasonably well explored in a new report co-authored by Saul Eslake from the new Australian think tank, the Grattan Institute:

Australia’s productivity challenge

Technically, the report is very good, but it’s weak on policy discussion. Regrettably, the Grattan Institute appears afraid to champion reform of our highly regulated IR system. The Grattan Institute adopts a very peculiar reading of Gary Banks’s veiled criticism of Government IR policy in a December conference speech. The Productivity Commission Chairman observed (as quoted in the Grattan Institute report):

If we are to secure Australia’s productivity potential into the future, the regulation of labour markets cannot remain a no-go area for evidence-based policy making.

Regarding Gary Banks’s fairly clear hint that Australia needs labour market reform, the Grattan Institute comments:

We do not interpret this as a criticism of the present Government’s changes to workplace relations legislation. It is too early to ascertain what impact, if any, those changes have had on the flexibility and adaptability of workplaces to changing economic circumstances. However, we do endorse Banks’ intimation that the further changes to the workplace relations framework should be considered if it becomes apparent that the capacity of firms to cope with changing economic circumstances has been materially affected.

Huh? The final vague conditional statement lacks conviction. Does the Grattan Institute believe in labour market reform or not? Come on Grattan Institute, you can show more courage than this.