Australia’s Missing Productivity Strategy

The Mary series is ongoing. The policy research is underway. Until that’s ready, here’s what else is on my mind.

By Aiden Garrison

Every budget cycle in Australia eventually hits the same wall. Business groups say there are labour shortages. Governments say productivity is weak. Industry says projects can’t get built. Hospitals say they can’t find staff. Aged care providers say there aren’t enough workers. Builders say they can’t get trades. Universities produce degrees while employers still can’t fill roles.

The solution almost always becomes the same: import more workers.

To be clear, migration has played an enormous role in building modern Australia. This is not an anti-migration argument. It is a productivity argument.

Because underneath the migration debate sits a much larger question: why does Australia spend so little retraining its own workforce?

This weeks budget had the usual mixture of targeted relief, political balancing, infrastructure promises, and cost-of-living measures. Another round of redistribution dressed up as reform.

But beneath the headlines sat a much larger omission.

No serious national productivity strategy. No workforce transformation plan. No aggressive retraining framework. No structural reform capable of materially changing Australia’s long-term economic trajectory.

Instead, the political energy revolved around negative gearing changes, capital gains tax changes, higher regulatory friction, increasing compliance burdens, and expanding bureaucracy layered over housing, energy, construction, and small business.

Each policy is defended in isolation. Each sounds manageable on its own. Each is framed as fairness.

But collectively, they send a broader message.

The system is becoming increasingly uncomfortable with private aspiration unless it is tightly managed, taxed, regulated, and redistributed.

This is where the contradiction appears.

Australia says it wants more housing, more investment, higher productivity, faster infrastructure, energy transition, and less pressure on living standards. But simultaneously, the policy environment punishes capital formation, entrepreneurial risk, property development, small business expansion, and long-duration private investment.

That is not a strategy. That is a slow squeeze.

Here is the number nobody talks about.

Australia spends roughly 0.2% of GDP on active labour market programs and retraining. That places us alongside the United States and well below the Nordic economies. Denmark, Sweden, and Finland spend between 1% and 2% of GDP on labour market adaptation, retraining, and workforce transition.

The difference isn’t just money. It’s philosophy.

The Nordic countries don’t view retraining as welfare spending. They view it as economic infrastructure. Their model assumes something Australian policymakers still struggle to accept — entire industries will disappear, technology will replace jobs, workers will become obsolete. The economy only survives if labour adapts faster than disruption.

So they intervene early. Workers are retrained. Industries are mapped. Labour shortages are forecast. Employers, unions, government, and training systems are linked together.

The result is economic flexibility — something we don’t have.

Australia is projected to need roughly 1.4 million additional skilled workers over the next four years across healthcare, aged care, disability support, construction, infrastructure, engineering, technology, education, and energy transition.

That number alone should have triggered a national workforce mobilisation strategy.

Instead, the debate remains dominated by migration intake levels, university numbers, visa processing, and incremental training announcements.

The obvious question barely gets asked.

Why is one of the richest countries in the world planning to import enormous volumes of labour while spending only 0.2% of GDP retraining its existing workforce?

Here’s the thing that kills me about this.

The government already publishes a skilled migration list. It is literally a public document that says — here are the jobs Australia cannot fill. Every occupation on that list is an admission that we have failed to develop the domestic workforce to meet our own needs.

A smart government would look at that list and make every single occupation on it a domestic retraining priority simultaneously. Not instead of migration — as well as it.

A 45-year-old retail worker transitions into aged care support. A displaced warehouse worker moves into civil construction. A casual labourer becomes an electrician. The objective is not certificates. It is productive conversion.

The biggest obstacle isn’t money. Australia wastes extraordinary amounts of money already.

The real obstacle is the system itself.

The moment governments announce skills reform, an entire bureaucracy immediately forms around administering the reform instead of delivering the outcome. Committees appear. Frameworks appear. Consultation papers appear. Accreditation layers expand. Compliance departments grow. Providers optimise for subsidies instead of employability.

Before long, the original mission disappears underneath the machinery designed to manage it.

Everyone inside the system is individually rational — departments protect themselves, regulators avoid risk, agencies demand process, ministers avoid controversy, providers chase funding certainty. But collectively, the result is paralysis.

The economy slows while the paperwork expands.

If a retraining system is ever built properly, the measure of success has to be brutally simple.

Did the worker move into a shortage occupation and remain employed there for 12 to 24 months?

Not enrolments. Not certificates. Not course completions. Not announcements.

Did it work?

Australia is entering a period where AI will displace parts of white-collar work, automation will reshape logistics and manufacturing, aged care demand will explode, and housing delivery remains constrained. The country knows what it needs. The shortage list proves it.

The real productivity question isn’t how we grow GDP.

It’s whether the Australian system can still solve large national problems — or whether the bureaucracy itself has become the bottleneck.

Last night’s budget didn’t answer that question.

It didn’t even ask it.