Conclusion
This statement has identified areas where reform of Government policy can help to expand Australia's productive capacity over time, with the objective of building a more efficient and equitable economy, with high levels of productivity and participation, that is able to deliver a higher level of overall wellbeing.
The focus has been on some of the broad elements which could contribute to an improved policy and institutional framework for better utilising Australia's existing infrastructure stock and skill base, and for improved investment decisions in these areas in future years.
The discussion has emphasised the importance of rigorous cost‑benefit analysis in informing infrastructure investment decisions. The discussion has also emphasised the value in enhancing market arrangements so that relative price and wage signals play the maximum possible role in guiding resource allocation. For infrastructure, this means a greater use of market mechanisms as determinants for both the efficient use of existing assets at any point in time and investment in infrastructure to improve longer term productive capacity. For educational and training institutions, there is also a need to be flexible in responding to changing demands in the nature and content of training.
The Productivity Commission (2006) estimated that improving productivity and efficiency in energy, transport, infrastructure and other activities could, after a period of adjustment, increase GDP by nearly 2 per cent. It also estimated that achievement of a 5 per cent improvement in the productivity of health service delivery could add up to 0.4 per cent of GDP in the longer term. Enhancement of workforce participation and productivity though education and work incentives was estimated to result in increases in GDP of up to 3 per cent.
Economic reforms are challenging and will take a period of years to implement and bear fruit. Nevertheless, the Government has moved quickly to establish two new institutions to deliver some elements of these reforms — Infrastructure Australia and Skills Australia. The payoff from successful reform will be a boost to Australia's productive capacity over the medium term — in other words, low and stable inflation accompanied by stronger growth in incomes and living standards.
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