Australian Economy Weekly Update — Week Ending 22 August 2025
At the heart of Australia’s long-term economic resilience lies productivity growth. It is the foundation upon which rising living standards, more substantial business investment, and sustained income growth are built. The Productivity Commission, as the Federal Government’s independent microeconomic adviser, was established to examine the structural forces shaping our economy and to recommend reforms that can lift national prosperity. Its objectives are clear: to identify barriers to growth, propose reforms that enhance efficiency and competitiveness, and chart a path that ensures Australia remains dynamic, resilient, and globally competitive.
In its recent series of inquiries and the national economic reform roundtable, the Commission set out five central themes. These were: fostering a more dynamic and competitive economy, managing the transition to cheaper and cleaner energy, harnessing the benefits of data and digital technology, building a skilled and adaptable workforce, and delivering quality care more efficiently. Collectively, these priorities capture the pressing structural issues facing Australia: the need to lift innovation and business dynamism, the imperative of aligning climate policy with economic opportunity, the integration of technology into every sector, the challenge of demographic change, and the efficiency of care delivery systems.
The Commission’s work comes at a time of notable concern. Labour productivity fell 0.1 per cent in the December quarter and is down 1.2 per cent year-over-year. Australians are working harder, but not working smarter. This stagnation highlights the need for reform. Without meaningful change, wage growth and household incomes will stagnate, and the cost of maintaining social and health services will weigh more heavily on future generations.
The roundtable itself brought together business leaders, unions, and policymakers. The outcomes, while not yet delivering immediate reform, provided clarity around areas of consensus. There was recognition of the need to streamline regulations, enhance the regulatory environment for new technologies, and explore more efficient road pricing systems. The Commission also highlighted opportunities to strengthen early intervention in health and social services, including reforms to the NDIS, aged care, and child development pathways. Notably, there was agreement that productivity growth cannot be achieved solely through longer working hours. It must come from innovation, investment, and skills development.
However, the outcomes also reflected the political and social complexity of reform. While broad themes of fairness, sustainability, and competitiveness were endorsed, few concrete measures were announced. Tax reform, for example, was acknowledged as essential, yet remained deferred for further consultation. In this sense, the roundtable was a step forward in framing the national conversation, but it fell short of delivering decisive policy change.
For investors and businesses, the message is twofold. First, productivity growth will continue to be the central determinant of Australia’s long-term economic performance. Second, while reform momentum is building, delivery will be gradual. Structural reforms in energy, skills, and digital adoption will take years to filter through the economy.
The Commission has provided a roadmap, and the consensus is forming. The task now falls to the government to convert discussion into action. For Australia, the stakes are high. Lifting productivity is not optional—it is the only path to sustaining growth, supporting wages, and securing the resilience of the economy in an increasingly competitive global environment.
From our perspective, there will likely be an ongoing need for debt capital to be provided to Australian businesses to enhance productivity and increase overall profitability. This is at the core of our investment thesis.
