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Australia’s productivity collapse may have been due to the reopening of the nation’s hospitality sector after COVID-19, new research suggests as separate analysis shows businesses with women on their boards are more likely to profitably adopt breakthroughs such as artificial intelligence.
But the work by the Productivity Commission and economists at the Reserve Bank shows that despite an improvement in productivity in recent months, the nation still faces an uphill battle to improve Australians’ living standards.
Businesses with female directors or who have a background in STEM were more likely to profitably adopt new technologies such as AI.Credit: iStock
Australia’s productivity growth rate, along with most other developed nations, has been declining for most of this century. It has prompted fears that without new technological breakthroughs, Australians will have to work longer and harder if they are to remain among the world’s richest people.
The most recent national accounts showed a 0.9 per cent lift in productivity through the September quarter, the first quarterly increase since the start of 2022.
Productivity Commission deputy chair Alex Robson said despite the turnaround in the September quarter, productivity levels were still 2.1 per cent lower over the past 12 months and only back to where they were in 2019.
He said a “productivity bubble” had emerged during the pandemic, when people temporarily moved out of low-productivity sectors such as hospitality, and into more productive areas.
“That bubble burst as workers returned to those lower-productivity sectors when pandemic-related restrictions eased. In the wake of this, we are only now seeing labour productivity approach pre-COVID levels,” he said.
Robson said while productivity was no longer in freefall, governments had to look at reforms that would enable the country to grow more efficiently, which would in turn boost Australians’ living standards.
“Australia’s productivity returning to 2019 levels is no cause for complacency, as that level came at the end of a decade of relatively weak productivity growth,” he said.
A key element to lifting productivity is businesses adopting new technologies that enable their staff to produce more goods and services at a lower cost.
Research from Reserve Bank economists Kim Nguyen and Jonathan Hambur, released on Thursday, found Australian businesses lagged their US counterparts when it came to adopting two so-called digital general-purpose technologies (GPT) – cloud computing and artificial intelligence/machine learning.
They found there had been a surge in the adoption of GPT during COVID-19, but this had since reverted to its low pre-pandemic level.
Businesses that did take up new technologies were more likely to be more profitable and have a better return on assets. But whether a business took the leap into new technologies often depended on the make-up of its board of directors.
According to Nguyen and Hambur, female directors and those with a STEM degree or masters in business administration ran firms that were more likely to adopt GPT and delivered better profits than those that ignored such breakthroughs.
“Firms with female representation on the board are more likely to increase their profitability post-adoption, adding to existing evidence on the benefits of within-firm diversity for firm performance,” they found.
“We also find evidence of the importance of director and worker skills in adoption. Having gender-diverse boards with a strong technical background is associated with a greater chance of profitable
GPT adoption.”
The research was based on commentary in the earnings calls and annual reports of publicly listed companies, which was combined with information on business performance, management and hiring patterns.
Nguyen and Hambur said their research also showed the importance of businesses hiring skilled workers who were able to adopt and use GPT.
They said building a “skilled and dynamic” labour force was pivotal to boosting productivity at the business level, noting there was also scope to encourage businesses to invest more in emerging technologies.
“We do find evidence that it has become easier to profitably adopt GPT, which could support productivity growth going forward, particularly if firms are encouraged to invest and improve through strong competition,” they said.
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