Workforce participation likely to fall, putting pressure on Australia's living standards

Improving incomes, innovation and fairness

Evolving community attitudes and policies can reduce the impact of population ageing. Policy reforms on a wide front are more likely to yield significant dividends than reforms restricted to any one area. Faster productivity growth, faster innovation, and improved participation in the workforce are driven by a combination of strong competition and flexible product and labour markets.

Future reforms

Ongoing policy reform and evolving community attitudes could lift participation rates and productivity growth to higher levels. This would raise living standards for all Australians.

Australian economic reform has been responsible for moving jobs and investment to areas of higher return, and creating a competitive environment that has driven change and innovation. While productivity growth rose in the 1990s, Australian productivity levels still trail the world's best in many sectors. And our participation rates in some groups are relatively low.

Technological advances continue to increase the potential for productivity gains. Recent comparisons of OECD member country performance show that innovation, productivity growth and income growth are all driven by high competition and flexible, lightly regulated product and labour markets.

Product market competition helps produce good employment and productivity outcomes. There is scope in a number of areas to move closer to global best practice.

Flexible labour markets contribute to strong innovation outcomes as well as high participation and low unemployment. While there has been significant reform, there is still scope to do more.

Reducing long–term unemployment or inactivity contributes to reducing poverty and inequality. Reforms that improve participation and productivity and lower unemployment make society both richer and fairer.

Education can play a critical role because it lifts both productivity and participation. An ageing population will need to engage in lifelong learning.