This article first appeared in the Financial Review on 4 June 2025

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Treasurer Jim Chalmers has said productivity will be the focus of economic policy in the Labor government’s second term. Such a focus is desperately overdue.

Labor’s first term was characterised by industrial relations changes that made workplaces less flexible and stoked industrial disputes, leading to less productive workplaces.

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Meanwhile, Labor’s ballooning government spending has crowded out private investment.

Productivity growth in Australia has stalled over the past decade. In key sectors such as construction, it has actually gone backwards.

At the same time, private capital expenditure has just recorded its biggest annual contraction since 2020.

As CSL’s Brian McNamee said this week, this “quiet business withdrawal of investment dollars” is the result of “an accumulation of hostile policies and government crowding out of enterprise”.

An economy characterised by low productivity, hostile regulatory settings, and a poor investment climate deeply hurts Australia’s competitiveness and our economic performance.

And it is felt in the unprecedented decline in living standards that Australians have experienced over the past three years.

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“Artificial intelligence has the potential to launch Australia out of our productivity rut and restore our competitiveness as a nation.”

Productivity is the main determinant of living standards. Productivity growth contributed more than 80 per cent of income growth for the three decades before the pandemic, according to the Productivity Commission.

So stagnant productivity growth should not only be a concern for businesses. It should also be a major concern for workers, who will not see their living standards improve unless national productivity gets moving again.

Artificial intelligence has the potential to launch Australia out of our productivity rut and restore our competitiveness as a nation.

This is especially true in the services sector, a dominant and growing part of our economy, and where productivity gains have been especially challenging.

Just as robotics and automation helped transform manufacturing, making each worker more productive, AI holds out the promise of transforming the services sector and making each worker more productive.

As the Business Council of Australia stated earlier in the week, “AI can deliver a significant productivity boost and that means higher real wages.”

Australia has a strong track record of being an early and successful adopter of new technologies. We need to take the same confident approach towards artificial intelligence.

This can only come about if we embrace the technology and allow innovation and experimentation around it to flourish.

But like any new technology, learning to get the most out of AI, training workers how to use it, and re-engineering business systems and processes to complement it will take time.

An overly cautious approach or risk-averse regulations risk strangling the necessary experimentation that will be needed for Australian workplaces and workers to get the most out of the new technology.

This means that any AI guardrails put in place must be genuinely informed by risk, not by unfounded fears.

‘An unhelpful dynamic’

This is why the suggestion by Labor’s new industry minister, Senator Tim Ayres, that trade unions should be able to exercise some sort of veto over the use of artificial intelligence in workplaces is alarming.

It is retrograde and risks Australia falling behind the rest of the world in the embrace and exploitation of AI.

It threatens to turn artificial intelligence into a tool to be exploited by unions in industrial relations bargaining.

And it sets up an unhelpful dynamic, suggesting that business will gain but workers will lose from artificial intelligence.

In fact, as the historical record of new technologies suggests, workers stand to gain much from tools that make their lives easier and their time more productive.

The Financial Review’s AI Summit showcased how Australian companies are already using artificial intelligence to improve their business.

Suncorp is using it to process insurance claims more quickly – something policyholders appreciate – while ANZ Bank is using it to speed up approvals for loans.

Staff who previously spent countless hours on such tasks have been redeployed to higher-value or more complicated work.

AI has the potential to make our workforce far more productive and restore some of the traditional competitiveness and dynamism of Australia’s economy.

But our government needs to display leadership to allow this to happen.

Suggesting that the deployment and use of this transformational opportunity should be outsourced to the trade unions is an abdication of such leadership.

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