THE FACULTY QUARTERLY 

Winter, June 2013

CPOs - first with the news

Don Argus declares productivity a national imperative 

Don Argus Productivity ImperativeCPOs were first with the news when Don Argus warned delegates at The Faculty’s Executive Breakfast that a doubling of gross national debt could trigger a long period of low growth and declared it critical to increasing productivity to deal with the heavy debt load.

Addressing the need for stronger and more sustained productivity is undoubtedly a key focus for CPOs operating in the manufacturing, resources or capital intensive industries. Increasingly, however, services based business are also reviewing their efforts to drive greater efficiencies through continuous improvement initiatives to reduce duplication of effort, address staffing levels, transform and harmonise technology platforms, and build world class capability.

Speaking less than 48 hours after Budget Night, the former BHP Billiton chairman and National Australia Bank chief executive said there was uncertainty surrounding the budget and that the forecasts in it were subject to political interference.

In the disturbing critique, he also warned that Australia was set to inherit the same challenges facing other ravaged first world economies if the crippling cost rises striking resources projects continued, warning: "Our so-called boom will finish sooner than we think".

Contemplating what high debt levels might mean for the future of the country, Argus told Executive Breakfast guests: "At best it portends a long period of low growth for Australia. As you rack up debt you are bringing forward consumption. In order to pay back debt, you must forfeit spending."

Reflecting earlier comments made by former politician, author and journalist, Maxine McKew, Argus queried at what point borrowing for the future was "a failure to deal with our political will in regard to spending and taxation policies".

Quoting Dr Jennifer Westacott, head of the Business Council of Australia, McKew earlier noted one of the many challenges facing government is: “to start reconfiguring the tax system so that it can raise enough revenue without compromising economic growth or competitiveness. As it stands, Australia’s tax system  is not competitive in an increasingly global economy. We have too many taxes and overly complex tax arrangements - 115 taxes raise just 10% of revenue while 10 taxes raise 90%.”

Building on this theme, Argus told CPOs: "There is a big difference between borrowing money for infrastructure spending that will benefit our children, and borrowing money to spend on ourselves today with no future benefits."

Further, Argus contends that while technologies which will improve automation could lead to greater productivity, many businesses simply do not have the money for this kind of ‘future proofing’.

The government maintains debt levels are low by global standards and point to relatively low overall unemployment figures, Argus contends other levers for growth may also come through exposing robust sectors to international competition, focusing on innovation, and improving work practices.

Coming just weeks after Ford's decision to stop manufacturing cars in Australia in 2016, these comments add more fuel to the debate over the role of government in buttressing Australian manufacturing.

For Argus, many politicians fundamentally lack a sufficient understanding of the levers for improving productivity, pointing to Canberra’s propensity to blame unions, the high Aussie dollar, or interest rates for those problems compromising economic performance.

According to McKew, this lack of understanding is not caused by shortcomings of intellectual ability in Canberra, but related to how politicians themselves are incentivised:  “[These days, politician’s] KPI’s are all built around how busy you are - how many announcements, photo opportunities and point scoring on Sky News that you can pack into a morning - don’t worry about accountability, because by the afternoon you will have moved onto a new job.

Regardless of the root causes of our declining productivity, Argus closed the Executive Breakfast with the grim prediction: "Without sustained productivity growth, Australians are not going to enjoy anything near the growth in average real incomes they have enjoyed over the past two decades."

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