Politics Analysis

AUSVOTES ECONOMIC FACTS #7: Under Labor, Australia is more productive

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The economy is a dominant issue in the Election. From now until polling day, Independent Australia will outline some key facts on the economy that put the kybosh on many of the myths, lies and distortions being peddled in the election campaign.

This is the seventh in a series of short articles by leading economist Stephen Koukoulas, which will be published daily up until the Federal Election on Saturday 3 May 2025.

FACT SEVEN: BUSINESS INVESTMENT RISES UNDER LABOR AFTER A DECADE OF DECLINE

In the Treasurers’ debate between incumbent Jim Chalmers and his opposite number Angus Taylor, the Shadow Treasurer claimed that private sector business investment under Labor had fallen to a record low as a share of GDP.

The level of business investment is a critical issue for productivity — if workers are using obsolete or inferior machinery, equipment and IT, their per-hour output will be lower than it would otherwise be. Conversely, new equipment investment will underpin productivity.

A check of Mr Taylor’s claim shows that he was either ignorant of the data or was making up a story for cheap political purposes.

This chart shows a long-run history, produced by the RBA, of business investment as a share of GDP.

(Source: RBA)

Looking at the history of this series in numerical terms, when the Coalition took office in September 2013, the business investment to GDP ratio was 16.4%. 

From that point, a business investment drought saw the ratio cascade to fall below 11% in the period from the September quarter of 2020 to the June quarter of 2022. This was the weakest extended period of business investment on record (although there was one quarter in the early 1990s recession where is dipped to what was a record low of 10.2%).

The fate of our economy will be on the line on 3 May. The facts have never been more important than right now.

Other facts in this series:

Stephen Koukoulas is one of Australia’s most respected economists, a past chief economist of Citibank and senior economic advisor to an Australian Prime Minister. You can follow Stephen on Twitter/X @TheKouk.

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