Governor Lowe Identifies Productivity As The “Bigger Challenge”

In unscripted comments at the G20 finance minister and central banking meeting in India, RBA Governor Lowe warned that boosting productivity growth was a “bigger challenge” for the world than the near-term problem of elevated inflation, according to The Australian. He observed that there wasn’t a lack of good ideas but a lack of political will.

• Lowe said that “the political challenge is to get these good ideas that are already out there, through our political systems.” He also observed that “many good ideas have their root in multi-national co-operation”.
• Without a pickup in productivity growth “we are condemning our citizens to slower growth in real wages, smaller public services and an increased tension on income distribution.”
• Lowe has warned recently that without an improvement in productivity growth, which fell 4.5% y/y in Q1 in Australia, then wage growth at 4% is a problem for the inflation outlook.