New report urges Australians to work harder not smarter
Australia’s productivity has flatlined despite record-high employment and longer workweek hours, a new report by the Productivity Commission has revealed, as reported by The Guardian on May 28, 2025.
The report paints a concerning picture: Australians are clocking in more hours than ever, yet national productivity remains stagnant. The findings warn this trend could jeopardize future economic growth and living standards unless business investment and practices evolve.
Findings show productivity growth last year was just 0.07%, a figure that Australian Industry Group CEO Innes Willox said was nothing more than “a rounding error”, and doesn’t demonstrate productivity growth across the nation.
The Commission attributes this stagnation to a decade-long trend, masked only briefly by a pandemic-era “productivity bubble.”
That short-lived boost, seen during the first two years of COVID-19, collapsed by the end of 2023. The return to longer workweeks post-pandemic did not translate into greater efficiency.
Productivity Commission deputy chair, Alex Robson, has warned that this increase in hours without improvements in output signals a broken system: “You can get more money if you work longer, but that’s not a recipe for prosperity over the longer term.”
Why Working Longer Hours isn’t Paying Off
According to the report, many of the additional hours worked have not been accompanied by sufficient business investment in systems and technologies to improve efficiency.
Service sectors, including healthcare, education, and social services, now make up around 80% of Australia’s Gross Domestic Product (GDP). These areas have been particularly slow to improve productivity. In the care economy alone, declining labour productivity contributed 18% to the national drop, a trend partially attributed to rapid workforce expansion with many new, less experienced workers.
What is Gross Domestic Product (GDP)?
GDP is the total monetary value of all goods and services produced within a country over a specific period.
Construction and housing have also been identified as significant “productivity laggards”, hindered by outdated workflows and a lack of coordination among stakeholders.
Employer groups, such as the Australian Industry Group, argue that overregulation, complex compliance requirements, and economic headwinds are discouraging investment in productivity-enhancing innovations.
In contrast, unions have pointed to weak management practices and a reluctance to modernize as key barriers. Australian Council of Trade Unions (ACTU) Secretary, Sally McManus, said, “Actually, it is on (businesses) – it’s on their management practices and it is certainly on their refusal to invest in technology.”
The ACTU argues that businesses have failed to invest in modern technologies, with limited adoption of automation, cloud services, and AI. This underinvestment has left operations reliant on manual processes and legacy systems, contributing to stagnant productivity.
Nick Davis from the Human Technology Institute at the University of Technology Sydney said “We need to make sure as workers become more experienced, it’s about making sure workers can really use those, making sure they’re well governed, and the way we work is redesigned to get better quality outputs.”
Remote Work “Not to Blame” Says Commission
The report addresses concerns that the rise of remote work following the pandemic has negatively affected productivity. However, the Commission found no evidence to support this claim. Instead, the drop in productivity was linked to a surge in working hours after lockdowns ended, not the shift to hybrid or remote models.
Data shows that before the pandemic, only 11% of working-age Australians worked from home at least once a week. By August 2024, that number had risen to 36%. Despite this change, the Commission reported that hybrid work, where employees split time between home and the office, was either neutral or beneficial to productivity.
“Workers do not need to be in the office full-time to experience the benefits of in-person interactions. As a result, hybrid work (working some days remotely and some days in the office) tends to be beneficial to productivity, or at least is not detrimental to productivity”, the report stated.
It also noted that remote work tends to reduce distractions, sick days, and breaks, which typically contributes positively to output. However, it cautioned that fully remote setups may hinder less experienced employees, who benefit from face-to-face mentoring and collaboration.
The findings reaffirm that the challenges to productivity lie not in work location, but in how work is structured, supported, and managed.
The Government’s Response to Australian Productivity
To address these challenges, the Commission has launched five targeted inquiries focusing on the care economy, technology and digitization, workforce skill development, net-zero readiness, and modernizing service delivery.
Treasury Secretary Steven Kennedy noted that Australia’s long-term productivity growth average has slipped from 1.8% to 0.8% over the last 20 years. The government has committed $900 million to competition reforms and is considering broader deregulation to stimulate business innovation.
What Can Employers and Business Do?
Australia is not suffering from a lack of effort, it’s suffering from a lack of smart strategy and investment in technological solutions. The future of work won’t be shaped by more hours at the desk, but by better tools, clearer leadership, and modern workflows.
To reverse the productivity slump, Australia must:
- Rethink outdated management models
- Invest in digital tools and employee training
- Prioritize quality over quantity of labor
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