Economists warn that Australia’s productivity is lagging on the global stage, ranking second last among OECD countries, better only than Mexico.
Historically, we rate poorly in terms of remuneration, international experience, employee training, working hours and skilled labour. What this means is that, in the rankings of world competitiveness, Australia is well down the list.
Politicians are concerned, roundtables are being convened and economists are circulating papers to sound the alarm searching for a better way forward.
The Productivity Commission recently called the nation’s productivity growth disappointing, with labour productivity falling by 0.7 per cent in the December 2025 quarter, which sits well below long-term average growth.
Productivity Commission chair Danielle Wood warns that Australia’s productivity growth has stalled since 2016. “We need to get productivity moving to ensure future generations can live better and more prosperous lives than those that came before them,” Wood says.
“No single policy reform can bring productivity growth back to its long-term average – governments will have to make a lot of pro-productivity decisions that support and reinforce each other.”
We’re measuring an industrial-age economy in a knowledge and care era.
Lauren Ryder, CEO of Leading Edge
Treasurer Jim Chalmers told the nation that boosting productivity is central to this year’s budget because it’s the best way to lift wages and living standards. The budget was designed to reduce regulatory costs and make it easier to build, do business, invest and innovate.
But what if it’s the metric used to measure productivity that is the problem?
While it’s difficult to measure and difficult to fix, right now, productivity is often calculated as a ratio of Gross Domestic Product (GDP) per total hours worked.
It’s complicated, but outputs and inputs, such as labour, capital and time, are converted into goods and services. Sluggish wage growth and taxes are also productivity factors.
But perhaps the measure itself may be the problem, suggests Lauren Ryder, chief executive of Leading Edge Global. The business management consultant believes the nation is operating in a new economy and the ruler used to measure productivity is broken.
“The productivity measures are going backwards, and it can’t be explained, so we have to have a way to start talking about what we’re actually producing,” she says.
Ryder, of Sydney, points out that the economic centre of gravity has shifted dramatically, away from mining and manufacturing, which traditional productivity metrics were built to capture, towards services, care, education and public administration.
“So much of the economy is made up of service providers – such as professional services, nurses, educators and governments – and none of them can be measured,” she says. Her research suggests that the ruler is broken for a new economy, meaning that labour outputs are harder to measure.
“We’re measuring an industrial-age economy in a knowledge and care era. The gap between what we measure and what we produce is widening every year. That’s not evidence of a lazier workforce. It’s evidence of a broken ruler,” Ryder says.
This has led her to coin the phrase “phantom labour” to describe the growing body of work in Australia’s economy that is real, demanding and genuinely valuable, but structurally invisible to the productivity frameworks to measure it.
“We keep asking why Australian workers aren’t more productive when we should be asking whether our definition of productivity is fit for the economy we actually have. Phantom labour is what happens when the work outgrows the framework used to value it.
“The work is happening. The value is real. The system just can’t see it. The phenomenon is not new, but I believe it has become urgent that we find a better way to measure our productivity,” Ryder says.
“I don’t believe Australia has a workforce that has stopped caring about performance. It has a measurement system that has stopped reflecting what performance looks like.”
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