Hard work ahead to boost nation's productivity

Kickstarting reform in essential services like education and health has been highlighted as a key focus for Australia to shore up its future prosperity.

In a major, five-yearly report, the Productivity Commission listed improving access to tertiary education, bolstering the integrity of carbon offsets and using train and bus fares more strategically among 71 ideas to get sluggish productivity growth moving.

The Productivity Commission said improving education, one of five areas of reform, was crucial to getting ahead after Australia's productivity growth slumped to its slowest rate in 60 years.

The commission called on the federal government to double down on its "demand-driven model" for providing Commonwealth-supported places to domestic university students to better align courses with skill needs.

Several recommendations focused on driving reforms in the public service.

These include running a more rigorous cost-benefit analysis over major projects to avoid cost blowouts and delays, and using procurement to drive innovation in healthcare and human services.

For example, the commission recommended an annual rolling review of selected services subsidised by Medicare to ensure funding was only going to treatments that were deemed clinically effective.

Adapting to climate change and achieving net zero at least cost has also been flagged as a high-level objective.

The commission backed the safeguard mechanism as the best way to drive down emissions and recommended progressively tweaking it to cover a wider range of sectors.

Several recommendations were levelled at workplace relations laws, with the commissions calling for a renewed focus on awards.

Reforms to Australia's migration system also featured, with the commission urging a move away from occupation-based lists towards wage thresholds as the basis for employer-sponsored migration.

There are also several recommendations aimed at boosting competition and dynamism across the economy, including reforming planning and zoning regulations so they are not "unduly restrictive" and moving towards a nationally consistent road user charging system. 

Australia has a "productivity predicament", according to the commission, with productivity growth slowing over the last 20 years as it has in much of the developed world.

The authors note that while some sectors have experienced enormous productivity growth - resulting in dramatically cheaper and better products - others have been slower, including many service sectors.

The commission says productivity improvement in services is hard as these industries are labour-intensive, often delivered in-person and not suitable for mass production..

"Future productivity growth in Australia relies crucially on getting better productivity across the services sector," the report says.

Treasurer Jim Chalmers said not all of the report's recommendations would be implemented but most aligned with his government's values and priorities.

"There'll be some conflict with our priorities and values, but overwhelmingly, the directions and the themes set out in the report today are areas that we're interested in and that we're progressing," he told ABC Radio on Friday.

"We've got these big shifts in our economy, these big trends and transitions. And we haven't taken full advantage of that."