August 18, Prime Minister Anthony Albanese and Treasurer Jim Chalmers hosted a three-day Economic Reform Productivity Summit in Canberra, inviting about 30 leaders from business, unions, civil society, and policy circles to discuss the future trajectory of the Australian economy. The summit focused on boosting national productivity and was organized around three themes: resilience, productivity, and fiscal sustainability with tax reform.
Speakers included Reserve Bank Governor Philip Lowe, Productivity Commission Chair Michael Woods, and Dr. Satyanapalli, Director of the Grattan Institute. The government also revealed that it had received 900 submissions from experts, industry, and the public to inform the discussions.
Chalmers stated that the summit discussions would form the basis for “the next three federal budgets and even longer-term policy initiatives.” Topics under consideration were broad and sometimes controversial, including tax system restructuring, relaxing AI regulations, and promoting a four-day workweek. The government hopes to generate “concrete recommendations” to accelerate economic growth, improve living standards, and gradually repair the budget deficit.
This summit represented a significant move by Labor, bringing together representatives from multiple sectors to signal the new government’s commitment to reform.
Labor and the Unions: Historical Context
The Australian Labor Party (ALP) emerged in the 1890s, founded by unions, and remains one of the few parties in the world that allows direct union affiliation. By the early 20th century, most unions—especially blue-collar ones—joined Labor, giving unions significant influence over party structures and decision-making. Labor’s policies have long reflected union priorities, including wage protection, workplace safety, working hours, and collective bargaining rights. Unions could even influence parliamentary candidate nominations.
Through internal structures, unions exercise “low-key but effective” lobbying, collaborating closely with party elites to shape policy formulation and implementation.
Australian unions occupy a unique societal role as the largest civic representative bodies, with membership exceeding the population that regularly participates in religious services. In the late 19th century, Australian workers faced harsh conditions: low wages, long hours, and no work injury protections. These struggles prompted strikes and protests, particularly by Queensland shearers, directly contributing to the creation of unions and the Labor Party and establishing a deep institutional link between the two.
The 1890s marked the peak of union activism in Australia. Widespread strikes and work stoppages were common. One notable tactic was the “sympathetic strike,” where workers at other companies would strike in solidarity when one business treated its staff unfairly. While demonstrating strong unity, this approach was controversial and eventually outlawed.
Today, unions remain a vital force in labor rights advocacy. Surveys indicate that roughly 20% of non-members would join if given the chance, over 60% of Australians see unions as critical to protecting workers’ rights, and nearly half believe that stronger unions would benefit society overall. Currently, unions collectively represent about 60% of the workforce through enterprise agreements and award systems.
This structural alliance forms a dual “ideological and resource” partnership: unions influence policy, while Labor relies on unions for campaign funding and manpower—a historically close, mutually beneficial relationship.
Beyond a “Workers’ Party”
As manufacturing has declined, traditional blue-collar union influence has weakened, while unionization among white-collar and professional workers has risen. Today, Australia’s largest unions are no longer miners or factory workers but nurses, with the public sector providing the bulk of union membership. Many white-collar and professional unions (e.g., nurses, teachers, academics, state public servants) are not formally affiliated with Labor. Thus, typical union members today are often white-collar professionals in non-affiliated unions.
For Labor to maintain its role as “the nation’s largest party” following federal election victories, it must expand beyond its image as a purely “workers’ party” to represent a broader constituency, becoming a government “for all Australians.”
The summit symbolically reflects this shift. Beyond unions, it included representatives from banking, mining, universities, superannuation funds, think tanks, and independent MPs, signaling the Albanese government’s ambition to pursue cross-sector collaboration and a “more sustainable, inclusive” approach to economic governance in its second term.
Australia’s Parliamentary System
Labor also needs to engage diverse stakeholders, including other parties and capital, to secure future governance—particularly given Australia’s parliamentary system.
The Australian Parliament comprises the House of Representatives and the Senate, both of which share equal power on most legislation.
The House of Representatives (lower house) has 150 seats elected directly from constituencies. Candidates must secure over 50% of votes to win. States with larger populations have more seats. A party holding a majority in the House forms government, with its leader becoming Prime Minister. For example, Labor formed the government in the last election, with Albanese as Prime Minister.
The Senate (upper house) has 76 seats, with 12 per state and 2 per territory, elected via proportional representation for up to six-year terms. Equal representation across states gives the Senate a crucial role in balancing large and small state interests.
The two houses also act as checks on each other. Bills originate in the House but require Senate review and debate; if the Senate rejects a bill, it fails. Thus, even with a House majority, Labor must seek cross-party support, especially in the Senate, to ensure smooth passage of legislation.
Post-Election Economic Pressures
In the recent federal election, economic issues were among voters’ top concerns: rising living costs, housing challenges, tax cuts, and employment opportunities—all areas voters expect Labor to address.
One key pressure is that wage growth has lagged far behind inflation. During the pandemic, real wages fell while prices surged. Although real wages began to recover by 2024, past declines make the path to recovery uncertain.
Structural changes also matter. In the 1960s, manufacturing and blue-collar sectors dominated, and unions helped drive wage growth. Today, manufacturing accounts for less than 7% of employment; blue-collar work has largely been automated or outsourced. Emerging sectors like education and healthcare initially boosted wages but have been constrained since 2012 by wage cap policies.
This has led to income stagnation, greater reliance on government support, rising public spending, and fiscal pressure.
The central question: how can Australia generate more wealth? Reliance on foreign exchange and taxes is no longer sufficient. Boosting national productivity is key to improving living standards, enhancing competitiveness, and overcoming current economic challenges.
The Centrality of Productivity
On the eve of the summit, the Reserve Bank of Australia (RBA) cut interest rates and downgraded productivity growth forecasts from 1% to 0.7%. The RBA warned that continued productivity weakness would profoundly affect corporate profits, household income, and overall demand.
RBA Governor Lowe noted that slowing productivity not only suppresses wages but also threatens Australia’s global competitiveness. She delivered a speech on day two to outline these challenges.
Chalmers acknowledged: “Productivity is the most pressing challenge in our economy.”
In economics, productivity measures efficiency: output per unit of input (labor, capital, technology). Productivity growth is thus crucial not just as an economic metric, but as a foundation for higher living standards and national competitiveness.
According to the Productivity Commission, Australians in the 1960s worked five hours more per week than today, with reduced hours reflecting productivity gains and increased leisure. If growth stalls, future outcomes may reverse. The Commission estimates that by 2035, weak productivity could leave full-time workers earning AUD $14,000 less annually than potential levels.
Lowe emphasized: “Slow real wage growth stems from stagnant productivity. Boosting productivity will raise real wages, benefiting all Australians.”
Albanese’s focus, therefore, is on enhancing national productivity to address structural economic challenges, beyond implementing piecemeal policies.
Reform Commitment and Skepticism
Despite this, some remain skeptical about Labor’s reform resolve. ABC reported a leaked Treasury document suggesting that some policy directions may have been pre-decided, making the summit largely ceremonial. Opposition MP O’Brien criticized it as a “talkshop to endorse Labor policies” benefiting the “privileged.”
Albanese countered that good policy arises from open discussion and institutional processes, not predetermined outcomes. Chalmers’ spokesperson emphasized that the government is “ready to consider” new ideas.
However, the Treasurer has ruled out a union-backed four-day workweek; Finance Minister Gallagher expressed openness to flexible and remote work arrangements.
Tax reform remains highly contentious. While Chalmers stressed that deep tax reform is essential for breakthroughs in productivity and fiscal sustainability, Albanese repeatedly emphasized that the government will only implement election-promised tax policies, raising doubts about whether major reforms will be delayed until the 2028 election.
Economist Richard Holden bluntly remarked: “The question is whether the summit will truly spark bold thinking—or just another political show, with three days ending in a press release and everything staying the same.”