Skip to main content

Site navigation

  • University of Technology Sydney home
  • Home

    Home
  • For students

  • For industry

  • Research

Explore

  • Courses
  • Events
  • News
  • Stories
  • People

For you

  • Libraryarrow_right_alt
  • Staffarrow_right_alt
  • Alumniarrow_right_alt
  • Current studentsarrow_right_alt
  • Study at UTS

    • arrow_right_alt Find a course
    • arrow_right_alt Course areas
    • arrow_right_alt Undergraduate students
    • arrow_right_alt Postgraduate students
    • arrow_right_alt Research Masters and PhD
    • arrow_right_alt Online study and short courses
  • Student information

    • arrow_right_alt Current students
    • arrow_right_alt New UTS students
    • arrow_right_alt Graduates (Alumni)
    • arrow_right_alt High school students
    • arrow_right_alt Indigenous students
    • arrow_right_alt International students
  • Admissions

    • arrow_right_alt How to apply
    • arrow_right_alt Entry pathways
    • arrow_right_alt Eligibility
arrow_right_altVisit our hub for students

For you

  • Libraryarrow_right_alt
  • Staffarrow_right_alt
  • Alumniarrow_right_alt
  • Current studentsarrow_right_alt

POPULAR LINKS

  • Apply for a coursearrow_right_alt
  • Current studentsarrow_right_alt
  • Scholarshipsarrow_right_alt
  • Featured industries

    • arrow_right_alt Agriculture and food
    • arrow_right_alt Defence and space
    • arrow_right_alt Energy and transport
    • arrow_right_alt Government and policy
    • arrow_right_alt Health and medical
    • arrow_right_alt Corporate training
  • Explore

    • arrow_right_alt Tech Central
    • arrow_right_alt Case studies
    • arrow_right_alt Research
arrow_right_altVisit our hub for industry

For you

  • Libraryarrow_right_alt
  • Staffarrow_right_alt
  • Alumniarrow_right_alt
  • Current studentsarrow_right_alt

POPULAR LINKS

  • Find a UTS expertarrow_right_alt
  • Partner with usarrow_right_alt
  • Explore

    • arrow_right_alt Explore our research
    • arrow_right_alt Research centres and institutes
    • arrow_right_alt Graduate research
    • arrow_right_alt Research partnerships
arrow_right_altVisit our hub for research

For you

  • Libraryarrow_right_alt
  • Staffarrow_right_alt
  • Alumniarrow_right_alt
  • Current studentsarrow_right_alt

POPULAR LINKS

  • Find a UTS expertarrow_right_alt
  • Research centres and institutesarrow_right_alt
  • University of Technology Sydney home
Explore the University of Technology Sydney
Category Filters:
University of Technology Sydney home University of Technology Sydney home
  1. home
  2. arrow_forward_ios ... Newsroom
  3. arrow_forward_ios ... 2023
  4. arrow_forward_ios 07
  5. arrow_forward_ios Is the Productivity Commission beyond repair?

Is the Productivity Commission beyond repair?

27 July 2023

Chris Barrett has a formidable job ahead as the new Productivity Commission chief, writes UTS Emeritus Professor Roy Green.

Advanced manufacturing robot

Australia has fallen to 91 out of 133 countries in the Harvard economic complexity ranking. Image: Shutterstock

This week’s appointment of Wayne Swan’s former chief of staff Chris Barrett to head the Productivity Commission puts the annual Trade and Assistance Review it released this month under a more searching spotlight than usual.

Remarkably, the Commission used the review to target one of the key policies on which the Albanese government was elected. With Chalmers signalling plans for a “new focus”, it might turn out to have been one of the last chances for the “old” Productivity Commission to say (again) what it thinks.

The Commission doesn’t like (and has never liked) industrial policy – the idea of governments supporting industries in order to help them grow, and where possible to participate in global markets and value chains.

Its Trade and Assistance Review suggests it regards the government’s approach to tackling climate change and the energy transition as an industrial policy in all but name. It wants it subject to its gold standard scrutiny for any misallocation of resources.

Climate change and energy sticking points

How disappointing it must have been to have nothing as ambitious to scrutinise under the previous government. Except of course for the $7.9 billion a year diesel fuel tax rebate, primarily for mining companies, which the Commission’s review studiously omits to treat as support.

The Commission takes particular issue with the government’s intention to promote battery manufacturing in Australia, an idea with merit given Australia produces 50% of the world’s lithium, has abundant energy to process it, exports almost all of it, and captures as little as 0.53% of its final value.

The thinking is that Australian industry might for once move up the value chain and begin the task of diversifying our narrow trade and industrial structure, based as it is on the export of unprocessed raw materials.

In a world where the biggest gains from trade are in knowledge-driven goods and services, a resources dependent industrial structure lacks the economic complexity to achieve these gains, and is increasingly vulnerable to supply chain shocks.

Australia has fallen to 91 out of 133 countries in the Harvard economic complexity ranking, which measures the diversity and research intensity of a nation’s export mix, just ahead of Namibia.


Australia’s economic complexity is sinking

Ranking out of 133 countries

Countries improve their economic complexity ranking by increasing the number and complexity of the products they successfully export. Source: Harvard Economic Complexity Index


The problem is that while successive commodity booms made Australians richer through appreciation of the dollar, the higher dollar also made a good deal of Australian manufacturing uncompetitive, both domestically and globally.

This is what’s known as “Dutch disease”, a term coined to represent the impact of North Sea gas on Dutch manufacturing in the 1970s, and later, the impact of the UK’s discovery of North Sea oil.

Australia’s de-industrialisation is not as much a case of “market failure”, a possibility the Productivity Commission occasionally acknowledges, as one of abject policy failure.

Norway did things differently

In contrast, Norway took a public stake in its North Sea oil and gas, imposed a 76% resource rent tax and created the world’s biggest sovereign wealth fund.

Norway is now able to take part in global manufacturing supply chains in a way Australia is not, and is able to build a net zero emissions economy using world-leading research and innovation.

Such an idea is heresy in the parallel universe of the Productivity Commission, which appears to believe Australia should double down on its status as the world’s most efficient quarry and repudiate efforts to add value, as they would supposedly cost more than the benefits they produced.

The remarkable feature of this Productivity Commission approach is that it appears not to be based on evidence.

Battery manuafcture is worth investing in

In the case of batteries, experts have calculated that domestic manufacturing would boost gross domestic product by $55 billion a year, for a total investment of $35 billion through to 2035, and produce a tax take over two years of $30 billion.

Batteries are an example of how to turn a comparative advantage based on natural endowments into a “competitive advantage”, based on knowledge and ingenuity.

The fundamental problem with the Commission’s approach comes back to reliance on a “static equilibrium” model of the economy, where the assumptions themselves give rise to predictable winners and losers.

The fact productivity growth has stalled in Australia for two decades, and is now accompanied by wage stagnation, might not be due to governments ignoring the Commission’s recommendations, as some like to argue, but rather due to it implementing them.

Meanwhile, industrial policy elsewhere around the world is devised as part of a dynamic model of growth and innovation, preparing nations for the industries and technologies of the future.

As it is, the Productivity Commission is ill-equipped for the challenges Australia is about to face. Barrett’s task is a formidable one.The Conversation

Roy Green, Emeritus Professor & UTS innovation adviser, University of Technology Sydney

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Share
Share this on Facebook Share this on Twitter Share this on LinkedIn
Back to Business and law

Acknowledgement of Country

UTS acknowledges the Gadigal People of the Eora Nation and the Boorooberongal People of the Dharug Nation upon whose ancestral lands our campuses now stand. We would also like to pay respect to the Elders both past and present, acknowledging them as the traditional custodians of knowledge for these lands. 

University of Technology Sydney

City Campus

15 Broadway, Ultimo, NSW 2007

Get in touch with UTS

Follow us

  • Instagram
  • LinkedIn
  • YouTube
  • Facebook

A member of

  • Australian Technology Network
Use arrow keys to navigate within each column of links. Press Tab to move between columns.

Study

  • Find a course
  • Undergraduate
  • Postgraduate
  • How to apply
  • Scholarships and prizes
  • International students
  • Campus maps
  • Accommodation

Engage

  • Find an expert
  • Industry
  • News
  • Events
  • Experience UTS
  • Research
  • Stories
  • Alumni

About

  • Who we are
  • Faculties
  • Learning and teaching
  • Sustainability
  • Initiatives
  • Equity, diversity and inclusion
  • Campus and locations
  • Awards and rankings
  • UTS governance

Staff and students

  • Current students
  • Help and support
  • Library
  • Policies
  • StaffConnect
  • Working at UTS
  • UTS Handbook
  • Contact us
  • Copyright © 2025
  • ABN: 77 257 686 961
  • CRICOS provider number: 00099F
  • TEQSA provider number: PRV12060
  • TEQSA category: Australian University
  • Privacy
  • Copyright
  • Disclaimer
  • Accessibility