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Productivity Revamp Essential for Economic Strength – RBA

Productivity Revamp Essential for Economic Strength – RBA

(12 February 2024 – Australia) Without sparking a recovery in flagging productivity the nation risks elevated interest rates for longer the Reserve Bank of Australia (RBA) warns.

The Australian economy is only as productive now as it was in 2019 according to the Productivity Commission. Wage rises will have to be lower and interest rates higher for longer if the RBA’s optimistic projections for a productivity rebound turn out to be wrong, the RBA warns.

The central bank anticipates a recovery in productivity growth as businesses invest more in tools and equipment and transitory pandemic impacts diminished.

“If there’s more productivity, then you can pay your workers more because they’re worth more, they’re producing more. If productivity isn’t rising, if it’s falling, then that doesn’t bode well for rises in wages” stated RBA Governor Michele Bullock.

“What does it imply for monetary policy? It just means that we have to make sure that we bring demand back down so that businesses, when they’re facing these costs increases, they’re thinking twice about whether or not they can pass these cost increases on.”

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