The productivity report by the the Economist Intelligence Unit is as rubbishy as its previous reports. The EIU claims that the top economic performers are Argentina, Botswana, Uganda and Tanzania. It ranks Australia 34 on economic performance behind Italy, Ireland and Portugal. The EIU ranks Australia 19th on industrial relations partly because union membership is a low 20%, so presumably the author thinks union density should be encouraged to improve Australia's rank on this measure.

Australia's labour productivity has increased respectably in the last few years. It is multifactor or total productivity that has fallen, in part because of the big investment in mining which has yet to pay off.

I am afraid there is no magic in addressing productivity concerns.In spite of mining projects taking a while to kick in, we still have a problem.If you read the Agriculture 2050 Green Paper, you will note that 95% of the industry that processes Australian food (considered a competitibve strength), is located in regional Australia - and the sector still employs 5 times the number in mining. However, it now costs twice that of the USA to kill a beast and a similar factor to process vegetables compared to NZ. Whether the arguments are tired or not, there is a great deal at stake - including the cost of hidden unemployment, if we wish to protect our living standards. We also need to keep in mind that the cash to fund new ideas often comes from the revenue generated by old ones.

The mantra of a civilized society should be that "the economy was created for man, not man for the economy". The above article appears to have been written by by someone who has forgotten this.
Much of the above seems to be about making life worse for the bulk of the population for the sake of "the economy" and the people at the top of the pile.
In measuring productivity it is important not to confuse value and price. For example, increasing sales of cigarettes will increase a price based GDP and subtract from a value based GDP. By contrast volunteering adds value to our society even though it doesn't add to GDP because it doesn't have a price.
We also need to be careful about our definition of man-hours. If you use man-hours worked you can increase productivity without increasing production by pushing less productive workers to the scrap heap and replacing them with more productive ones. From the point of view of the country it would be better to use "available man-hours" (the total number of man-hours people want to work) in the countries productivity measure.
At times when the output of a country is limited by skill shortages it may make sense to have a measure of productivity based on output per skilled man-hour. Under this measure it makes sense to use unemployed people to help tradespeople even though output per man-hour worked will drop.

First, citing this report doesn't bode well. The methodology has not been released to my knowledge and so it's relatively meaningless. Productivity can only be reliably analysed by looking at cycles. It is unclear to me that this report does that for Australia, let alone all the other countries. In other words, if one selectively or randomly chooses a point in time, it ignores trend growth.

Second productivity levels necessarily depend on PPP or some type of exchange rate adjustment. So is it possible that the BCA is happy that our "level" difference is higher/worse than the US? Gee, I wonder what would happen if the AUD/USD mean reverted? Would we then get an instant report that our productivity levels had suddenly improved?

Third, MFP or TFP is low across most of our competitors. Please compare New Zealand and Canada's MFP growth over the last decade. Australia is not unique.

Fourth, isn't welfare a more important measure of success. Productivity is not an end in itself.

Fifth, productivity is pro-cyclical. Australia hasn't had a recession since the early 90s, although admittedly we don't have the equivalent of the NBER dating committee and if we did maybe we would have had a mini-recession in 2009.

Finally, reliably estimating productivity for government services is extremely problematic. Output is effectively input, depending on how one goes about its measurement. That’s why most serious analysis focuses on the market sector.

If I've skipped over things and got it wrong, I'm happy to be corrected but I've got to go.

I think governments, businesses and economists probably need to have more realistic expectations and understand where the most important constraints to productivity improvements are and how to go about them to help raise productivity.
It probably means quite a number of new points or more creative thinking.
For example, the improvement in the terms of trade, as a luck gift to many Australians including Australian businesses, may mean they don't want to work that hard to raise productivity in the comparative sense, so they are happy to enjoy the life with better living standards. Alternatively, they need to be given greater incentives to work as hard as they did in the of no improvements in the terms of trade to produce the same improvement in productivity.
So this kind of work/leisure choice must be taken into account in analysing our productivity to really understand the true underlying factors on productivity in Australia.
However, I do share Professor Freebairn's view that government has important roles in raising productivity. Freebairn mentioned two of them: government policies such as taxation and government supply of services, like education, law and order.
Another important area the government has an important role is to ensure consumers get the maximum benefits from adequate competition, including from competition from overseas through trade policy.
It has been reported that Australians are charges much higher prices for many products or services than their overseas counterparts. This is not only detrimental to the welfare of Australians, but also is unconducive to competition and productivity.
The government must examine why that has been the case and develop the most appropriate policies to change it.
It is a mystery why the government hasn't done such work for so long.

Professor Freebairn, I would have to agree with your idea that government intervention by Australian Federal and State governments could affect productivity. Enabling higher productivity by removing unnecessary regulation from employment and from the movement of goods through our ports would be obvious starting points.

However, readers may misinterpret your words to imply government has a large role in driving productivity growth. Government is an impediment. It has been shown that even subsiding R&D has been wasteful. In fact, our higher productivity growth in the 1990's was almost certainly driven by technology spillovers from abroad. R&D in the United States dwarfs that of any other country, and the US military budget is a large part of this. Technology developed by the US military has found civilian uses that have increased productivity in the US and in other countries. The boost to military spending in the 1980's played a large role in the productivity boom of the 1990's. Australia cannot replicate this. We should concentrate on what we are good at and remove unnecessary workplace and product regulations.

I love my veggie patch.

The areas where poor soil, insect pests or other produce-limiting factors prevent the full bloom of my plantings, are given extra consideration. This is not at the expense of the areas where the plants grow tall and strong rather is complimentary to the higher producing sections.

In fact, the healthier my entire garden is, the less work and input it requires than if I neglected it.

Common sense really.

".....formal, transparent and public benefit cost assessment of major government investments..."

Indeed, like the billions of $$$ spent on building more motorways to "relieve congestion". Congestion costs the economy billions, building more costly roads does not solve the problem....yet they continue to be built? C/BA please!

One problem with the Prof's premise is that free-marketeers don't really want "free-markets" they just want to make more profit at the expense of everyone and everything else. For just one example, look at the life and times of Pres. Ronald Reagan - the sugar daddy of modern deregulation and privatisation; who was also (paradoxically) the president that resided over some of the largest government subsidies in US history (to his mates in particular industries of course).

Government regulation is at least regulation by a society-elected group of representatives. Company "regulation" on the other hand is regulation by an un-elected group of elites seeking profits for themselves and their paymasters. I think I prefer government regulation as inadequate as it may be.