Energy Policy and Productivity
Unlikely intending to, the suburban accountant belled the cat on Australia’s productivy problems. So wrote Ross Gittins in the SMH:
Because the private sector produces the great majority of the economy’s goods and services, it’s overwhelmingly the job of businesses – big and small – to gradually increase the productivity of their activities.
Interesting Ross. Who else produces goods and services in the economy? Government?
But here it is:
Next, every high school economics student knows that the main way businesses increase the productivity of their workers’ labour is by giving them more and better machines to work with. When they remember to mention it, economists call this “[physical] capital deepening”.
Not a bad observation from someone with likely no more instruction in economics than the high school level. However, let me repeat and emphasise the important point:
businesses increase the productivity of their workers’ labour is by giving them more and better machines to work with.
More and better machines.
Hey Ross. Do you know what powers these machines? It’s call energy. Mostly electricity. And given the near exponential rise in the price of electricity in Australia, not to mention increasing unreliability, why would a rational business owner invest capital in machinery? The required rate of return on capital has not gone up markedly, just the expected returns making the business case for capital deeping a poor one.
Adds Gittins:
Business investment has been weak for a decade but, when you preached your last sermon on the need for greater productivity, you didn’t see a need to mention this small fact?
Does the fact that business investment being weak for a decade and the correlation with the destruction of the Australia energy grid at all enter your thinking? Moron?
Asks Gittins:
So why have our businesses done so little to improve their productivity?
The more important question is why have governments done so much to destroy productivity?
Gittens likes to reflect on the economic hey days of the 80s and 90s. During that period, following the energy market reforms, the price and reliability of electricity in Australia went up. This conveniently mirrored the rise in productivity in Australia.
Meanwhile, over the past 20 years, it has been deliberate policy of Australian governments to increase the price of electricity in Australia. Correllation or causation. You decised oh suburban accountant.
Buffoon.
