Uploaded February 2024 | Updated September 2026, 9 hours ago
1319th Ordinary General Meeting and Open Lecture of the Royal Society of NSW — 7 February 2024
“Productivity: what is it, and why it matters”
Emeritus Professor Roy Green AM FRSN
Special Innovation Advisor
University of Technology Sydney
https://royalsoc.org.au/blog/1319th-ogm-and-open-lecture
The presentation commences at 00:46
Timing Marks:
00:00:00 Introduction to the Speaker: Dr Susan Pond AM FRSN FTSE FAHMS, President, Royal Society of NSW
00:02:01 Presentation: Professor Roy Green AM FRSN
00:43:57 Q&A session: Emeritus Professor Christina Slade, Chair , Program Committee, Royal Society of NSW
01:06:47 Vote of Thanks: Emeritus Professor Christina Slade
01:09:12 Meeting Close
Summary: Productivity isn’t everything, but in the long run, it’s almost everything”, Nobel economist Paul Krugman famously said. Productivity is a measure of output per unit of input, and a key determinant of living standards since the Industrial Revolution, but it remains an elusive concept. However defined, productivity growth has slowed across most developed economies, and more so in Australia than anywhere else. In the decade to 2020, average annual productivity growth was the lowest in 60 years at 1.1 per cent, with Australia slipping down the OECD rankings. And last year, productivity actually went backwards.
What are the causes of this decline, both globally and in Australia? Some argue that major industrial transformations have already taken place, and the digital revolution, despite its ubiquitous impact, does not compare with the advent of such things as commercial flight, the telephone, and urban sanitation. Others observe that the digital revolution itself and the rise of the intangible economy make productivity growth difficult or even impossible to measure accurately over time, and hence we should not pay it so much attention.
After much debate, the view taking hold among economists is that most countries have an identifiable cohort of high-value, R&D-intensive firms on the global productivity frontier. The differentiator is the extent to which public policy and institutions are able to facilitate the diffusion of technological change and innovation to the much larger population of firms which would otherwise be productivity ‘laggards’, pulling down average productivity growth. The challenge is that diffusion is a much slower process than disruptive or breakthrough innovation and requires the development of enterprise ‘absorptive capacity’.
Australia does not compare favourably in this context, now ranking 93rd out of 133 countries in the Harvard Atlas of Economic Complexity, which measures the diversity and knowledge intensity of our export mix. In addition, both government and business expenditure on R&D as a share of GDP has fallen behind the OECD average, and far behind global exemplars like Korea, Israel, Sweden and Japan. In absolute terms, Amazon spends almost ten times more than the entire Commonwealth research and innovation budget. Universities are now having to do much of the heavy lifting, but only as a result of their access to international student revenues.
How did we get here, is this a problem that needs addressing, and, if so, what can we do about it?
1319th Ordinary General Meeting and Open Lecture of the Royal Society of NSW — 7 February 2024
“Productivity: what is it, and why it matters”
Emeritus Professor Roy Green AM FRSN
Special Innovation Advisor
University of Technology Sydney
https://royalsoc.org.au/blog/1319th-ogm-and-open-lecture
The presentation commences at 00:46
Timing Marks:
00:00:00 Introduction to the Speaker: Dr Susan Pond AM FRSN FTSE FAHMS, President, Royal Society of NSW
00:02:01 Presentation: Professor Roy Green AM FRSN
00:43:57 Q&A session: Emeritus Professor Christina Slade, Chair , Program Committee, Royal Society of NSW
01:06:47 Vote of Thanks: Emeritus Professor Christina Slade
01:09:12 Meeting Close
Summary: Productivity isn’t everything, but in the long run, it’s almost everything”, Nobel economist Paul Krugman famously said. Productivity is a measure of output per unit of input, and a key determinant of living standards since the Industrial Revolution, but it remains an elusive concept. However defined, productivity growth has slowed across most developed economies, and more so in Australia than anywhere else. In the decade to 2020, average annual productivity growth was the lowest in 60 years at 1.1 per cent, with Australia slipping down the OECD rankings. And last year, productivity actually went backwards.
What are the causes of this decline, both globally and in Australia? Some argue that major industrial transformations have already taken place, and the digital revolution, despite its ubiquitous impact, does not compare with the advent of such things as commercial flight, the telephone, and urban sanitation. Others observe that the digital revolution itself and the rise of the intangible economy make productivity growth difficult or even impossible to measure accurately over time, and hence we should not pay it so much attention.
After much debate, the view taking hold among economists is that most countries have an identifiable cohort of high-value, R&D-intensive firms on the global productivity frontier. The differentiator is the extent to which public policy and institutions are able to facilitate the diffusion of technological change and innovation to the much larger population of firms which would otherwise be productivity ‘laggards’, pulling down average productivity growth. The challenge is that diffusion is a much slower process than disruptive or breakthrough innovation and requires the development of enterprise ‘absorptive capacity’.
Australia does not compare favourably in this context, now ranking 93rd out of 133 countries in the Harvard Atlas of Economic Complexity, which measures the diversity and knowledge intensity of our export mix. In addition, both government and business expenditure on R&D as a share of GDP has fallen behind the OECD average, and far behind global exemplars like Korea, Israel, Sweden and Japan. In absolute terms, Amazon spends almost ten times more than the entire Commonwealth research and innovation budget. Universities are now having to do much of the heavy lifting, but only as a result of their access to international student revenues.
How did we get here, is this a problem that needs addressing, and, if so, what can we do about it?
