Good news: our falling productivity is too bad to be true

There are few aspects of the economy on which more bulldust is spoken than our productivity. The world abounds with people trying to tell us that our productivity performance is a real worry and the way to fix it is to cut their taxes or give them a government handout. Yeah, sure.

These snake oil salesmen (and they’re almost always men) have been having a field day lately. Did you know that last financial year, 2022-23, the productivity of our labour actually fell by 3.7 per cent?

Fortunately, some sense arrived this week. The Productivity Commission issued its annual productivity bulletin, providing “the most complete picture to date of the drivers of Australia’s productivity decline over 2022-23,” it said. We now have a clearer understanding of what’s behind the slump, we’re told.

But first, let’s be sure you know what productivity is. It’s a comparison of the economy’s output of goods and services – measured by real gross domestic product – relative to our inputs of raw materials, labour and physical capital (machines, buildings, roads, bridges and so forth).

Our productivity improves when we use the same quantity of inputs to produce a greater quantity of outputs. In other words, it’s a measure of our efficiency.

We can improve our technical efficiency by inventing better machines for workers to work with, thinking of better ways to organise our mines, farms, factories and offices, increasing the skills of our workers, and having the government provide us with better roads and public transport to go about our business.

Usually, we focus on the productivity of our labour, measured by dividing real GDP during a period by the total number of hours employees and bosses worked during the period.

Over the past 28 years, the productivity of our workers increased at the average rate of 1.3 per cent a year. This improvement, when passed on to workers as higher “real” wages – wages growing faster than prices – is the main reason our material standard of living is much higher than our grandparents enjoyed.

The productivity of our labour generally improves a bit almost every year. It can fall a little during recessions, but it’s never fallen by anything like as much as 3.7 per cent. Which may mean the world’s coming to an end, but it’s more likely to mean there’s something funny going on with the figures.

The commission’s first revelation is that the number of hours worked during the financial year grew by an unprecedented 6.9 per cent, whereas the economy’s output of goods and services grew by 3 per cent. So, as a matter of simple arithmetic, our productivity worsened.

Now, before you jump to terrible conclusions, there are a few points to make. The first – which the commission didn’t make, but should have – is that one of the most basic things we expect the economy to do for us is to provide paid employment for all those of us who want to work.

And what happened last financial year is that a lot more people got jobs, and a lot of people working part-time got the extra hours of work they’d been seeking. It’s a safe bet that all those people being paid to work more hours were pleased to oblige.

So, before we beat ourselves up, we need to be clear that the unprecedented rise in hours worked was a good thing, not a bad thing. It was, in fact, part of the economy’s return to full employment for the first time in 50 years. That’s bad?

No, rather than cursing our bad luck or bad management, we should be asking questions: how on earth did that happen? It doesn’t make sense. Employers employ people to produce goods and services, not because they feel sorry for people who need a job.

So, if they increased their labour inputs by 6.9 per cent, how come their output of products increased by only 3 per cent?

When you hire more workers, you usually need to buy more tools and equipment for them to work with. If you don’t bother, then the extra workers won’t be as productive as your existing workers, and your average productiveness will fall.

The commission points out that businesses’ decisions to hire more workers didn’t lead them to acquire an equivalent amount of extra machines and other physical capital. The nation’s ratio of physical capital to labour fell by 4.9 per cent in the year – the biggest recorded decline in our history. “This meant on average, each worker had access to a shrinking amount of capital, which weighed down labour productivity,” it told us.

The point is, if you want productivity to improve, you need an increasing ratio of capital to labour. So, if businesses aren’t increasing their investment in capital equipment and structures sufficiently, don’t be surprised if productivity is getting worse rather than better.

But while I think it’s true that weak business investment is an important part of the explanation for our weak performance on labour productivity over the past decade, I don’t think it’s the reason productivity fell by 3.7 per cent last financial year.

No. One possibility is that while business has hired a lot more workers, it’s taking a bit longer for the increased investment and greatly increased output to come through. This is a common problem with the interpretation of changes in the economy over short periods. Wait a bit longer and the puzzle disappears.

But I think the true explanation is bigger than that – and so does the commission. It points out that, during the pandemic, measured productivity rose rapidly – mostly because high-productivity industries kept working, while low-productivity industries were locked down – but last financial year that measured gain disappeared.

Get it? COVID and our response to it, with lockdowns and economic stimulus, did strange things to the economy and to our measurements of it.

But by about June last year, the level of labour productivity was about the same as it was before the pandemic. We didn’t get much productivity improvement, but nor did we go backwards.

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How full employment has changed the economy

This may be the first time you’ve watched the managers of the economy using high interest rates and a tighter budget to throttle demand to get inflation down. But if it isn’t your first, have you noticed how much harder they’re finding it to catch the raging bull?

It explains why both the previous and the new Reserve Bank governor have been so twitchy. How, after they seem to have made as many interest rate rises as they thought they needed, they keep coming back for another one.

The economy isn’t working the way it used to. Have you noticed that, although consumer spending stopped dead in the September quarter, and overall growth in the economy slowed to a microscopic 0.2 per cent, there’s been so little weakness in the jobs market?

Although there’s no doubt about how hard most households have been squeezed over the course of this year, how come the rate of unemployment has risen only marginally from 3.5 per cent to a still-far-below-average 3.9 per cent in November?

And if the economy’s been slowing for the whole of this year, how come the budget balance is getting better rather than worse, with Treasurer Jim Chalmers achieving a surplus last financial year and hoping for another in the year to next June?

There are lots of particular things that help explain these surprising results – world commodity prices have stayed high; some parts of the economy change earlier than others – but there’s one, more fundamental factor that towers over all the others: this is the first time in 50 years that we’ve been trying to slow a runaway economy that’s reached anything like full employment.

It turns out that throttling an economy that’s fully employed is much harder to do. Households are more resilient and, after a period when it’s been hard to get hold of all the workers they need, businesses have been far less inclined to add to the slowdown by shedding staff.

Remember that we reached full employment by happy accident. Between the unco-ordinated stimulus of state as well as federal governments, plus the Reserve cutting rates to near-zero, we (like many other rich economies) hit the accelerator far too hard during the pandemic.

This was apparent after the pandemic had eased and before the Morrison government’s final budget in March last year. But there was no way Scott Morrison was going to hit the budget brakes just before an election.

So the econocrats in the Reserve and Treasury resigned themselves to second prize: an unemployment rate much lower than what they were used to and felt comfortable with.

Because the pandemic had also caused us to close our borders and thus block employers’ access to skilled and unskilled immigrant labour, the econocrats got far more than they expected: unemployment so low we hit full employment.

The jobs market is getting less tight, with the number of job vacancies having fallen a long way, but last week’s figures for November showed how strong the labour market remains.

Sure, unemployment rose a fraction to 3.9 per cent, but this is no higher than it was in May last year. And the month saw total employment actually grow, by more than a remarkable 61,000 jobs during the month.

After all this slowing and all this pain, the rate at which people of working age are participating in the labour force by either having a job or actively seeking one has reached a record high.

And almost 65 per cent of the working-age population has a job – a proportion that’s never been higher in Australia’s history.

Employment is still growing strongly, partly because of the rebound in immigration, with foreign students in particular filling part-time job vacancies.

But also, it seems, because more hard-pressed families are trying to make ends meet by taking second jobs. In past downturns, those jobs wouldn’t have been there to be taken.

To force households to spend less, they’re being hit with three sticks. Obviously, by raising mortgage interest rates. Also by employers, taken as a group, raising the wages they pay by less than they’ve raised their prices (have you noticed how Chalmers avoids referring to the cut in real wages by just blaming “inflation”?).

And, third, by the government allowing bracket creep to take a bigger bite out of what pay rises the workers do manage to get.

But there’s another factor that’s been working in the opposite direction, adding to households’ ability to keep spending: over the year to November, the number of people with jobs rose by more than 440,000. That’s a full-employment economy.

All the extra people with jobs pay income tax. All the part-time workers able to get more hours pay more tax. All the people getting second jobs pay more tax. Add the bigger bite out of pay rises, and you see why Chalmers’ budget’s so flush.

But note this: the many benefits of full employment come at a cost – “opportunity cost”. As a coming paper by Matt Saunders and Dr Richard Denniss of the Australia Institute will remind us, “opportunity cost makes it clear that when resources are used for one purpose, they become unavailable for other purposes”.

So when we’re at or close to full employment, any developer, business executive or politician seeking our support for any project because “it will create jobs” should be laughed at. Where will the workers come from to fill the jobs? You’ll have to pinch them from some other employer.

This is especially true when the jobs you want to create are for workers with specialist skills.

According to a federal government report, in October last year there were 83 major resource and energy projects at the committed stage, worth $83 billion. But about two thirds of these were for the development of fossil fuels, including the expansion of nearby ports.

Really? And this at a time when the electricity grid needs urgent reconfiguration as part of our move to a low-carbon economy, but projects are being deferred because you can’t get the workers?

As Saunders and Denniss conclude, “With rapid population growth and the stated need to transform our energy system, the real cost of spending tens of billions of dollars building new gas and coal projects is the lost opportunity to invest in the infrastructure and energy transformation the Australian economy needs.”

I think Jim Chalmers needs to explain the iron law of opportunity cost to his boss. And make sure Climate Change and Energy Minister Chris Bowen’s in the meeting.

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NSW Treasury's new realism: productivity won't be speeding up

Have you noticed how people keep banging on about “productivity” these days? That’s because it’s the secret sauce of economics, the bit that comes closest to giving us a free lunch. But also because we haven’t actually been getting much of it lately.

Unfortunately, that’s made productivity a happy hunting ground for bulldust propositions. So let’s spell out exactly what productivity is.

A business – or a whole economy – improves its productivity when it finds ways to produce more outputs of goods and services with the same inputs of raw materials, labour and physical capital.

Sounds a great idea, but how is it possible? Short answer: advances in technology. Workers become more productive when they’re given tools and machines to work with. Many improvements in technology are designed to make workers more productive.

Better education and training make workers more productive by increasing their “human capital”. Even finding better ways to organise factories and offices can improve productivity. So can be teaching bosses better ways to jolly along their troops.

In my writing about the topic, I always focus on the simplest and least inaccurate way of measuring productivity. The productivity of labour is just output per worker or, better, output per hour worked.

Another approach would be to measure the productivity of the other main “factor of production”, capital equipment and constructions: output per unit of capital employed.

But economists often prefer to focus on “total-factor productivity” (or “multifactor productivity” as the statisticians prefer to call it): the growth in output (gross domestic product) that can’t be explained by increased use of labour and capital.

Economists have discovered that most of the improvement in people’s material standard of living over the years and centuries has come from improvement in total-factor productivity. This is why economists seem so obsessed by it. Keep productivity improving and we get wealthier.

But, as you see, total-factor productivity can’t be measured directly. It’s measured as a residual – what’s left when you take GDP and subtract two different things – which increases the chance your measurement is wrong.

And the truth is, economists don’t know as much about what causes productivity improvement as they ought to. That’s why they’ve spent the past decade debating the reasons that productivity growth has slowed significantly in all the advanced economies, not just Australia.

Theories abound, but there’s no agreement. And while we’re hearing plenty of tub-thumping sermons from business people (and central bankers) with their own axes to grind, there’s no agreement on what we should be doing apart from blaming the government and demanding it do something.

But last year, Professor Thomas Philippon of New York University wrote a working paper that offered a quite different explanation for the weak productivity growth we’ve been experiencing.

Conventional economic theory assumes that total-factor productivity grows “exponentially”, but Philippon has examined America’s productivity figures since 1947 – and done the same for a large group of other advanced economies – and found the growth has merely been “linear”.

Huh? Try this. If you have $100 growing 2 per cent each year, that’s exponential. If instead it just grows by $2 a year, that’s linear. Exponential growth is a fixed percentage rate; linear growth is a fixed absolute amount. The first $2 is 2 per cent of $100, but over the years the percentage rate of growth slowly declines.

So Philippon is saying we’ve been expecting productivity to grow at a much faster percentage rate than we should have been. Because its growth is “additive” rather than “multiplicative”, its annual percentage growth is declining.

The assumption that productivity improvement is exponential implies that innovation today makes further discoveries easier in the future. Philippon, however, finds that new ideas add to our stock of knowledge, but they don’t multiply it.

In the NSW Treasury’s new research paper, Trends in productivity: What should we expect, Keaton Jenner and Angus Wheeler have replicated Philippon’s exercise for Australia, getting similar results.

Whereas the standard exponential model implies that total-factor productivity should have grown at the annual rate of 1.7 per cent between 1983 and 2019, they find this significantly overshoots actual productivity growth.

But the new, additive model implies that productivity increases by 0.024 points per year, with an annual growth rate that tapers down from 1.25 per cent in 1984 to 0.9 per cent in 2019.

So, Philippon’s additive model yields what would have been a much more accurate – though still slightly optimistic – forecast.

This suggests that, without some major new “general-purpose” technological advance (such as the spread of electricity, or the internal-combustion engine), the model predicts that total-factor productivity growth will slowly fall to zero per cent.

But this doesn’t mean living standards wouldn’t continue to improve. Because living standards are powered by the productivity of labour, the authors find, they would grow by increasingly larger absolute amounts, but not at a steady, exponential rate of growth.

In the NSW government’s intergenerational report in 2021, productivity projections were based on the historical 30-year average exponential rate of 1.2 per cent a year. Other assumptions meant that real gross state product was projected to grow at an average rate of 2.2 per cent a year out to 2041.

The authors repeat this exercise using an additive productivity model and find that annual growth in labour productivity declines from 1 per cent to 0.8 per cent over the 20 years to 2041. This means an average annual rate of growth in real gross state product of 1.9 per cent – 0.3 percentage points lower that projected in the 2021 report.

The authors point out that, if realised, the NSW economy would be about 7 percentage points smaller in 2041 than was projected in the report two years’ ago. This, in turn, would have “material implications” for the government’s revenue base and budget balance, assuming no offsetting reduction in government spending.

It will be interesting to see if Victoria and the other state governments recalibrate their projections using this new, more pessimistic – but more realistic – view of the future.

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It's not the wolf at the door that's driving women to work harder

Why do mothers go out to work? Why are more women doing paid work than ever before? And why are more of those women working full-time? At a time when so many are struggling with the cost of living, it’s easy to conclude that more women are having to work more hours just to keep up. But I think that sells women short.

Worse, it’s a fundamental misreading of perhaps the greatest social change of our age: the economic emancipation of women.

I don’t doubt that women are just as concerned about the cost of living as men, maybe more so if they’re in charge of the family budget. Nor do I doubt that, if you ask a woman why she’s been doing more paid work lately, the cost of living’s likely to be mentioned.

But things are not always as they seem. For instance, when people complain about the cost of living, their focus is on rising prices. But prices rise almost continuously. What matters more is whether wages are rising as fast as prices are – or, preferably, a little faster.

It’s true that the prices for goods and services have risen at a much faster rate than normal over the past two years or so. But the real problem is that wages – which usually do keep up – have been falling behind since the start of the pandemic. Yet people are far more conscious of the rising prices than of the weak wage growth.

Another distinction that’s clearer to economists than to normal people is between the cost of living and the standard of living. When people have trouble maintaining the same standard of living as their friends – a comparable car, comparable house, comparable private school – they would often rather blame the cost of living than their need to keep up with the Joneses.

No, what’s driving the change in women’s lives – causing them to behave very differently from their grandmothers – isn’t the cost of living, it’s education. And with education has come aspiration. Aspiration to put their learning to work, to have a career as well as a family, and to be treated equally with men.

I think it all started sometime in the 1960s when, for some unknown reason, the parents of the rich world accepted that their daughters were just as entitled to a good education as their sons. Everything flows from that fateful change in social attitudes and behaviour. What father today would dream of telling his daughter that, being a girl, she didn’t need an education?

The trouble for boys is that girls do education better. It’s now several decades since the number of girls going to university first exceeded the number of boys.

That being so, the figures for two-income families should come as little surprise. The latest report from the federal government’s Australian Institute of Family Studies, Employment patterns and trends for families with children, finds that in 2022, both parents were employed in 71 per cent of couple families with children under 15. This is up from 56 per cent in 2000, and 40 per cent in 1979.

Within those couple families, the proportion with both parents working full-time was 31 per cent in 2021, up from 22 per cent 12 years earlier. The proportion with one parent working full-time and the other part-time is unchanged at 36 per cent.

Only 4 per cent of these families involved fathers who weren’t working and mothers who were. (Which leaves the young men in my immediate family looking good.)

But there’s something else you need to understand. In the days when there weren’t many two-income families, this gave them a distinct advantage in the housing market. They could afford a better house than their peers.

Once most young home-buying couples have two incomes, however, their greater purchasing power gets built into the prices of the kind of houses they buy, so that what began as an advantage turns into a requirement.

Now it’s the couples who choose not to have both partners working who’ll have trouble affording a home comparable to those of other couples. They’ll have to accept a lower standard of living.

Similarly, it’s a misconception to say, as some do, that you need to have both parents working to afford a family. No, you just have to accept a lower standard of living.

I’ve long suspected that the rise of the two-income family helps explain the growing practice of sending kids to private schools. Two incomes make this easier to afford – though this, too, gets built into the size of the fees the schools can get away with charging.

There’s no reason a mother – or a father – who chooses to have a career should feel guilty about it. But I suspect some double-income couples find it easier to justify if they can say that the extra money is buying their kids a better education.

Sorry, a mountain of evidence says that, once you allow for the parents’ socio-economic status, private schools don’t add to students’ academic performance. Buyer beware.

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Business cries poor on wages, even as profits mount

Don’t believe anyone – not even a governor of the Reserve Bank – trying to tell you the Fair Work Commission’s decision to increase minimum award wages by 5.75 per cent is anything other than good news for the lowest-paid quarter of wage earners.

Because they are so low paid, and mainly part-time, these people account for only about 11 per cent of the nation’s total wage bill. So, as the commission says, the pay rise “will make only a modest contribution to total wages growth in 2023-24 and will consequently not cause or contribute to any wage-spiral”.

But that’s not the impression you’d get from all the wailing and gnashing of teeth by the main employer group, the Australian Chamber of Commerce and Industry. It claims “an arbitrary increase of this magnitude consigns Australia to high inflation, mounting interest rates and fewer jobs”.

These are the sort of dramatics we get from the Canberra-based employers’ lobby before and after every annual wage review. They lay it on so thick I doubt anyone much believes them.

But it’s worse than that. In the age-old struggle between labour and capital – wages and profits – most economists have decided long ago whose side they’re on, and long ago lost sight of how one-eyed they’ve become.

For a start, many of the talking heads you see on telly work for big businesses. They’re never going to be caught saying nice things about pay rises.

Econocrats working for conservative governments have to watch what they say. And parts of the media have business plans that say: pick a lucrative market segment, then tell ’em what they want to hear.

In my experience, there’s never any shortage of experts willing to fly to the defence of the rich and powerful, in the hope that some of the money comes their way.

But I confess to being shocked in recent times by the way the present Reserve Bank governor, Dr Philip Lowe, has been so willing to take sides. The way he preaches restraint to ordinary workers struggling to cope with the cost of living, but never urges businesses to show restraint in the enthusiasm with which they’ve been whacking up their prices.

It’s true that Lowe has a board that’s been stacked with business people, but that’s been true for all his predecessors, and they were never so openly partisan.

When businesses take advantage of the excessively strong demand that Lowe himself helped to create, that’s just business doing what comes naturally, and must never be questioned, even in an economy characterised by so much oligopoly – big companies with the power to influence the prices they charge.

But when employees unite to demand pay rises at least sufficient to cover the rising cost of living, this is quite illegitimate and to be condemned. The more so when a government agency such as the Fair Work Commission acts to protect the incomes of the poorest workers.

On Friday, the commission set out what has long been the rule for fair and efficient division of the spoils of the market system between labour and capital: “In the medium to long term, it is desirable that modern award minimum wages maintain their real value and increase in line with the trend rate of national productivity growth”.

In other words, wage rises don’t add to inflation unless their growth exceeding inflation exceeds the nationwide (not the particular business’) trend (that is, over a run of years, not just the last couple) rate of growth in the productivity of labour (production per hour worked).

But last week, in his appearance before a Senate committee, Lowe was twisting the rule to suit his case, setting nominal (before taking account of inflation) unit labour costs (labour costs adjusted for productivity improvement) not real unit labour costs as the appropriate measure.

He told the senators that growth in labour costs per unit of 3 or 4 per cent a year was adding to inflation because the past few years had seen no growth in the productivity of labour (which, of course, is the fault of the government, not the businesses doing the production).

This is dishonest. What he was implying was that wage growth should not bear any relationship to what’s happening to prices at the time. Wage growth should be capped at 2.5 per cent a year every year, come hell or high water.

Without any productivity improvement, any wage growth exceeding 2.5 per cent was inflationary. Should the nation’s businesses choose to raise their prices by more than 2.5 per cent, what was best for the economy was for the workers’ wages to fall in real terms.

Now, Lowe is a very smart man, and I’m sure he doesn’t actually believe anything so silly. Like the employer groups, he’s cooked up a convenient argument to help him achieve his KPIs. He sees the inflation rate as his key performance indicator.

He’s got to get it down to the 2 to 3 per cent target range, and get it down quick. He ain’t too worried what shortcuts he takes or who gets hurt in the process.

When he claims that, absent productivity improvement, wage rises far lower than the rate of inflation are themselves inflationary, what he really means is that they make it harder for him to achieve his KPIs.

Clearly, the wage rise that would help him get the inflation rate down fastest is a wage rise of zero. It would plunge the economy into recession, and businesses would have a lot more trouble finding customers, but who cares about that?

It’s not true that sub-inflation-rate pay rises add to inflation. What is true is that the bigger the sub-inflation rise, the longer it takes to get inflation down. But he doesn’t like to say that.

Why’s he in such a hurry he’s happy for ordinary workers to suffer? Because he lies awake at night worrying that, if it takes too long to get inflation down, inflation expectations will rise and a price-wage spiral will become entrenched.

Does Treasury secretary Dr Steven Kennedy also lie awake? Doesn’t seem to. He told the senators last week that “there are no signs of a wage-price spiral developing and medium-term inflation expectations remain well anchored”.

If ever there was a general fighting the last war, it’s Lowe.

Meanwhile, please don’t say business profits seem to be going fine. It may be true, but please don’t say it. Business doesn’t like you saying such offensive things, and business’ media cheer squad goes ape.

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Most of us don't really want to be rich, for better or worse

When it comes to economics, the central question to ask yourself is this: do you sincerely want to be rich? Those with long memories – or Google – know this was the come-on used by the notorious American promoter of pyramid schemes, Bernie Cornfeld. But that doesn’t stop it being the right question.

It’s actually a trick question. Most of us would like to be rich if the riches were delivered to us on a plate. If we won the lottery, or were left a fortune by a rich ancestor we didn’t know we had.

But that’s not the question. It’s do you sincerely want to be rich. It ain’t easy to become rich by your own efforts, so are you prepared to pay the price it would take? Work night and day, ignore your family and friends, spend very little of what you earn, so it can be re-invested? Come unstuck a few times until you make it big? Put it that way and most of us don’t sincerely want to be rich. We’re not that self-disciplined and/or greedy.

The question arises because the Productivity Commission’s five-yearly report on our productivity performance has found that, as a nation, we haven’t got much richer over the past decade – where rich means our production and consumption of goods and services.

When business people, politicians and economists bang on about increasing the economy’s growth, they’re mainly talking about improving the productivity – productiveness – of our paid labour.

The economy – alias gross domestic product – grows because we’ve produced more goods and services than last year. Scientists think this happens because we’ve ripped more resources out of the ground and damaged the environment in the process.

There is some of that (and it has to stop), but what scientists can never get is that the main reason our production grows over the years is that we find ways to get more production from the average hour of work.

We do this by increasing the education and training of our workers, giving them better machines to work with, and improving the way our businesses organise their work.

But the commission finds that our rate of productivity improvement over the past decade has been the slowest in 60 years. It projects that, if it stays this far below our 60-year average, our future incomes will be 40 per cent below what they could have been, and the working week will be 5 per cent longer.

It provides 1000 pages of suggestions on how state and federal governments can make often-controversial changes that would lift our game and make our incomes grow more strongly.

So, this is the nation’s do-you-sincerely-want-to-be-rich moment. And my guess is our collective answer will be yeah, nah. Why? For good reasons and bad. Let’s start with the negative.

If you think of the nation’s income as a pie, there are two ways for an individual to get more to eat. One is to battle everyone else for a bigger slice. The other is to co-operate with everyone to effect changes that would make the pie – and each slice - bigger.

For the past 40 years of “neoliberalism”, which has focused on the individual and sanctified selfishness, we’ve preferred to battle rather than co-operate.

Our top executives have increased their own remuneration by keeping the lid on their fellow employees’ wages. Governments have set a bad example by imposing unreasonably low wage caps.

Then they wonder why their union won’t co-operate with their efforts to improve how the outfit’s run. Workers fear there’ll be nothing in it for them.

It’s the same with politics. Governments won’t make controversial changes because they know the opposition will take advantage and run a scare campaign.

But there are also good reasons why we’re unlikely to jump to action in response to the commission’s warning. The first is that economists focus on the material dimension of our lives: our ability to consume ever more goods and services.

We’re already rich – why do we need to be even richer? There’s more to life than money, and if we gave getting richer top priority, there’s a big risk those other dimensions would suffer.

Would a faster growing economy tempt us to spend less time enjoying our personal relationships? How would that leave us better off overall (to coin a phrase)?

How much do we know about whether the pace of economic life is adding to stress, anxiety and even worse mental troubles?

If we did go along with the changes the commission proposes, what guarantee is there that most of the increased income wouldn’t go to the bosses (and those terrible people with more than $3 million in superannuation)?

What we do know is that we should be giving top priority to reducing the damage economic activity is doing to the natural environment, including changing the climate. If that costs us a bit in income or productivity, it’s a price worth paying.

And there are various ways we could improve our lives even if our income stopped growing. Inquire into them.

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