Productivity comes from investment.

July 14, 2026

With a small population, Australia will always rely on value-added imports as the direct material underpinning of its standard of living. The question is, how do we pay for it? As pointed out by Roy Green, the Future Made in Australia is about setting up the strategic, value-adding assets that will produce what the world wants at competitive prices if we suceed in harnessing our absolute advantage in cheap renewable energy. To pay the ‘import bill’ we need industrial policy with heavy state intervention.

Productivity, then, is about what we are using this ‘blank cheque’ on the world for. Just to maintain high levels of consumption? Or will we set up the correct macro-economic levers – low interest rates, strong real wage growth, an exchange rate which corrects for inflation differentials instead of being a tool for speculation –  that encourage a highly entrepreneurial and investment-heavy (which means high net borrowing!) business sector, using this blank cheque to innovate.

Innovation, by definition, is what you do to make better use of the common things that everyone has access to. Only stable demand settings give businesses the incentive to take big risks. Otherwise businesses too are savers = rentier capitalism.