Federal Labor shadow treasurer Wayne Swan asserts that there is no connection between labour productivity growth and more flexible contract arrangements in workplace relations (Opinion August 9) and suggests that New Zealand's experience establishes that. However, he overlooks two important points.
In the short run more flexible workplace relations may result in increased employment rather than faster growth in labour productivity. This is exactly what happened after the Employment Contracts Act of 1991 in New Zealand, which now has one of the highest rates of employment and lowest unemployment rates amongst Organisation for Economic Cooperation and Development countries. If Australia had as high an employment rate as New Zealand we would have another 300,000 to 400,000 in jobs.
And second, labour productivity growth is only part of the productivity story.
An important part is whether multi-factor productivity growth also occurs because that indicates if businesses are able to institute technological and structural improvements. Although data is incomplete, there is evidence to suggest that it did occur in New Zealand after the reduction in labour market regulation there.
Flexible workplace arrangements in Australia would almost certainly improve both employment and, after a time, multi-factor productivity growth.
Unfortunately, the government's proposed changes are unlikely to provide the necessary flexibility.