The NSW Productivity Commission (Commission) has released its 'Kickstarting the productivity conversation' discussion paper for consultation, closing 27 November 2019.
The feedback received will inform whether the correct productivity priorities have been identified, and the policy options the NSW Government needs to consider.
Productivity challenges – dampened growth
Productivity growth has slowed globally since the early 2000's. The State's productivity growth averaged 2.8 per cent per year from 1994-95 to 1998-99, compared with just 0.8 per cent between 2003-04 and 2011-12.
The recent average productivity growth has been 0.9 per cent per year. If the NSW economy continues to grow at this rate rather than 1.5 per cent per year forecast in the 2016 NSW Intergenerational Report, the State's economy will be smaller by up to $24,000 per person by 2055-56.
NSW government revenues are dependent on strong productivity growth. However, labour force participation is expected to fall due to an ageing population, placing further strain on productivity.
As the traditional levers of economic growth reach their limit, the NSW government needs to prioritise its productivity goals now to create a strong foundation for future economic growth.
Opportunities for policy reform
The Commission has identified six priority areas with the potential to boost productivity in NSW. Importantly, these priority areas reflect the need for policy decisions that make more effective use of NSW's existing capital, labour and natural resources.
The aim is to remove unnecessary regulatory requirements on the use of private sector assets to encourage entrepreneurship, and make it easier for people to do business.
The priority areas are:
- Reforming occupational regulation which risks hindering the development of human capital and stunting labour force participation. In particular, the Commission is interested in improving the ability of the vocational education and training system to deliver the skills required by business, reducing regulatory barriers to employment, and enabling effective life-long learning.
- Improving water and energy efficiency to drive down prices. Areas of critical importance are waste water recycling, greenhouse gas abatement policies, electricity network asset utilisation, and demand management.
- Addressing infrastructure challenges by making better use of existing assets. Private sector collaboration and strategic planning are crucial to major project delivery.
- Reducing reliance on inefficient taxes in favour of more efficient taxes. For example, reforming transfer duties to encourage better use of the State's housing and commercial building stock.
- Minimising red tape to reduce the waiting period of DA approvals, which typically take twice as long in NSW across most development types compared with Victoria, Queensland and WA.
- Actively managing regulation to keep pace with markets and reduce the compliance costs for business.
Key discussion questions
The discussion paper presents an important opportunity to generate meaningful conversation about the six draft priority areas and the reform needed to galvanise change. However, the Commission has made it clear that the six areas are 'not exhaustive', and that it is open to further suggestions for consideration.
To help interested stakeholders make submissions, the paper provides key discussion questions. These include:
- How should occupational licensing regimes deliver their objectives without imposing unnecessary regulatory burden?
- How can New South Wales work to reduce uncertainty in electricity generation and emission reduction requirements to improve the investment outlook?
- How can we improve strategic land use planning and coordination with major infrastructure delivery?
- What steps could the NSW Government take to reduce its reliance on transfer duty?
- How could the NSW Government ensure regulations around zoning, building codes and design guidelines are flexible and aligned with demand and preferences?
- What new tools can be harnessed to enable an adaptive, iterative and outcomes-based approach? Is there scope for greater uptake of these tools in New South Wales?
Submissions on the NSW Productivity Commission's discussion paper close on 27 November 2019. A link to the discussion paper can be found here.
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