1319th OGM and Open Lecture

“Productivity: what is it, and why it matters”

Emeritus Professor Roy Green AM FRSN

Special Innovation Advisor
University of Technology Sydney

Date: Wednesday, 7 February 2024, 6.00 pm for 6.30 pm AEDT 
Venue: Metcalfe Theatre, State Library of NSW, Macquarie Street, Sydney
Video Presentation: YouTube Video
All are welcome

Summary: Productivity isn’t everything, but in the long run, it’s almost everything”, Nobel economist Paul Krugman famously said. Productivity is a measure of output per unit of input, and a key determinant of living standards since the Industrial Revolution, but it remains an elusive concept. However defined, productivity growth has slowed across most developed economies, and more so in Australia than anywhere else. In the decade to 2020, average annual productivity growth was the lowest in 60 years at 1.1 per cent, with Australia slipping down the OECD rankings. And last year, productivity actually went backwards.

What are the causes of this decline, both globally and in Australia? Some argue that major industrial transformations have already taken place, and the digital revolution, despite its ubiquitous impact, does not compare with the advent of such things as commercial flight, the telephone, and urban sanitation. Others observe that the digital revolution itself and the rise of the intangible economy make productivity growth difficult or even impossible to measure accurately over time, and hence we should not pay it so much attention.

After much debate, the view taking hold among economists is that most countries have an identifiable cohort of high-value, R&D-intensive firms on the global productivity frontier. The differentiator is the extent to which public policy and institutions are able to facilitate the diffusion of technological change and innovation to the much larger population of firms which would otherwise be productivity ‘laggards’, pulling down average productivity growth. The challenge is that diffusion is a much slower process than disruptive or breakthrough innovation and requires the development of enterprise ‘absorptive capacity’.

Australia does not compare favourably in this context, now ranking 93rd out of 133 countries in the Harvard Atlas of Economic Complexity, which measures the diversity and knowledge intensity of our export mix. In addition, both government and business expenditure on R&D as a share of GDP has fallen behind the OECD average, and far behind global exemplars like Korea, Israel, Sweden and Japan. In absolute terms, Amazon spends almost ten times more than the entire Commonwealth research and innovation budget. Universities are now having to do much of the heavy lifting, but only as a result of their access to international student revenues.

How did we get here, is this a problem that needs addressing, and, if so, what can we do about it?

Roy Green is an Emeritus Professor and Special Innovation Advisor at the University of Technology Sydney, where he was Dean of the UTS Business School. He graduated with First Class Honours from the University of Adelaide and a PhD in Economics from the University of Cambridge.

Roy has enjoyed a career in universities, government and industry and has published widely in the areas of science, technology and innovation policy, and management education, including projects with the OECD and European Commission.

He has led and participated in numerous public inquiries, as well as chairing bodies such as the Australian Government’s Innovative Regions Centre, CSIRO Manufacturing Sector Advisory Council, Food Innovation and Agribusiness Ltd (FIAL) Industry Growth Centre, NSW Manufacturing Industries Advisory Council and Queensland Competition Authority. He was also a member of the Prime Minister’s Manufacturing Taskforce.

Currently, Roy chairs the Advanced Robotics for Manufacturing (ARM) Hub and the Port of Newcastle, and is a board director of the SmartSat CRC and a member of the Charles Sturt University Council, the University of Newcastle Vice Chancellor’s Industry Advisory Board, the Committee for Sydney Economy Advisory Council, and the Australian Design Council. He is also a Fellow of the Royal Society of NSW.