Positive labour market signs hide underlying issues, Deloitte warns

Moderating inflation, falling interest rates, and growing wages mask underlying labour market issues and abysmal productivity performance, Deloitte Access Economics has warned.

This story first appeared on HR Leader sister brand Accounting Times.

While Australia’s labour market appears healthy on the outside, a new report by Deloitte Access Economics has said that poor labour productivity remains a persistent, structural challenge to long-term prosperity.

“Australian labour productivity has fallen considerably over the past three years,” Deloitte Access Economics partner and lead author, David Rumbens, said.

“Since its peak in March 2022, Australia’s labour productivity has fallen by 5.7% and labour productivity in the non-market sector now sits at a near 20-year low, underscoring why boosting productivity growth should be a top priority for government.”

Deloitte’s findings echoed Productivity Commission reports that revealed that Australia’s labour productivity has stagnated over the past 10 years, excluding a temporary spike during the pandemic. Without productivity growth, Australia’s living standards are set to flatline, the commission said.

The incoming Labor government has said that productivity, not inflation, would be the defining economic challenge of its next term of government.

In its report, Deloitte Access Economics said that emerging technologies such as generative AI could pose a partial solution to Australia’s ongoing labour productivity headache.

“The use of generative artificial intelligence (GenAI) in the workplace is growing rapidly across many businesses, with potential implications for productivity,” Deloitte Human Capital partner Sarah Rogers said.

“The role of AI for professionals is enormous. There are large opportunities for automating or augmenting routine tasks and creating worker efficiencies across many occupations.

“This will likely redefine many professional roles in the year ahead, and organisations need to rethink work, skills, teams and jobs to capture these gains.”

GenAI could boost efficiency and free up workers’ time to spend on higher-quality tasks, potentially enhancing the desirability of certain occupations, Rogers said.

As previously reported by HR Leader, employer groups across the country have been rigorously calling on the government to improve productivity levels.

Innes Willox, CEO of the Australian Industry Group (Ai Group), lamented Australia’s “economic performance”, touching on some of the persistent issues.

“Our own economic performance has been far from stellar, with growth, business investment and household spending all recently weak. Recent OECD research found that Australian real household incomes fell by 1.8 per cent in 2024 – the worst result of any OECD economy,” said Willox.

“Meanwhile, many of our structural economic problems – of stagnant productivity, chronic housing and skills shortages, and rising public debt levels – remain in place.”