Australia's Economy 'Drifting' on Weak Productivity, Think Tank Says

Australia's economy is drifting, failing to convert its natural resource advantages into sustained growth, a think tank report argued. The report cited weak productivity growth and stifling business conditions as the primary obstacles.

The think tank said Australia possesses the resources needed to be a globally prosperous economy. It is not translating those assets into meaningful economic outcomes. Productivity growth has been sluggish for years. Business conditions, including regulatory burdens and costs, are constraining investment and hiring.

Australia's wealth in minerals, energy and agricultural land has long been a source of export income. The report argued that these endowments alone are not enough. Without improving the efficiency of the domestic economy, the benefits leak out through higher costs and lower competitiveness.

Productivity growth measures output per hour worked. Australia's rate has averaged below 1% annually for a decade, well behind the OECD average. The Reserve Bank of Australia and Treasury have repeatedly cited weak productivity as a constraint on long-run growth. The think tank's assessment echoes those official warnings but adds a sharper critique of business conditions.

The report described business conditions as stifling. It pointed to high corporate tax rates relative to the OECD, complex regulatory approvals, and high labour costs. These factors reduce the return on investment and discourage risk-taking. Together, they prevent the economy from capitalising on its natural strengths, the report said.

For investors, the warning reinforces a cautious view on Australian equity exposure. The ASX has already lagged other developed markets this year as concerns about domestic growth conditions mount. The report adds a structural dimension to that caution, suggesting the growth drag may persist beyond any cyclical factors. Broader stock market analysis often highlights Australia's reliance on commodity cycles. The report argues the problem runs deeper.

The report did not prescribe specific policy changes. The diagnosis points to areas federal and state governments would need to address: tax reform, deregulation and infrastructure investment. Without action, the drift is likely to continue, the report said.

The think tank concluded that Australia's economic trajectory remains below its potential. The gap will widen unless the underlying problems are tackled.