Australia needs to shed its complacency about the economy and address issues such as the slide in productivity, says ANZ chief executive Mike Smith.
Mr Smith said on Friday that although the June National Accounts released in September showed that GDP (gross domestic product) was growing at almost four per cent on an annualised basis, the state figures showed a more challenging picture.
The resource-rich states of Western Australia and Queensland showed strong growth in demand, but in the non-mining states growth in demand was just two to three per cent.
Mr Smith said Australia’s mining boom – driven by strong economic growth in China – had masked weakening fundamentals in Australia’s economy.
He said the high value of the Australian dollar was putting the manufacturing and resources sectors under enormous pressure.
Commodity prices were easing, and global demand was softening.
While most “first generation” resources projects were still going to be built, up to two-thirds of projects still on the drawing board were not going to proceed in the foreseeable future.
Australia’s productivity performance was at its lowest point in 30 years.
“We have to be honest with ourselves when we talk about the performance of the Australian economy and to move on from the sense of complacency which exists in part of the community,” Mr Smith told an Australian British Chamber of Commerce luncheon.
“We have to urgently address Australia’s slide in productivity both to maximise the long-term opportunity in natural resources and in agriculture, and to create a softer landing for our trade-exposed industries like manufacturing.”
Mr Smith said meaningful action was needed to restart productivity growth.
Ballooning project costs were an obvious starting point.
Mr Smith said uncompetitive construction costs and site deals were the root cause of rising project costs.
Mr Smith, whose annual pay grew to $10.1 million this year, said the cost of labour was a massive problem.
“We have to involve everybody in this. We’ve got to get the unions to the table as well.
“The labour market needed to be made more flexible and it’s skills base improved.
“There is no doubt that labour flexibility has gotten worse, not better,” Mr Smith said.
Access to capital was another issue, given that Australia’s capital requirements were very large in a world where it was becoming increasingly scarce.
Mr Smith also said that a “national conversation” about how Australia takes advantage of the opportunities that Asia is providing it was “clearly well overdue”.
