Driving productivity through learning at work

The Productivity Imperative

Australia's productivity performance has deteriorated markedly over recent decades, culminating in a crisis that business leaders describe as a 'tipping point' in February 2026. Capital productivity fell 18.6 per cent over the 30 years to 2025, while labour productivity posted consecutive annual declines through late 2024 and remained stagnant or weak into 2025 quarters. The Reserve Bank of Australia has downgraded its medium-term trend productivity growth assumption to 0.7 per cent, reflecting persistent structural drags that have left aggregate productivity barely above pre-pandemic levels after five years of minimal gains.

This stagnation matters acutely now because it constrains the economy's supply side at a time when demand pressures are re-emerging. With GDP growth forecasts hovering around 1.9-2.1 per cent in the near term, weak productivity translates into slower income gains, higher unit labour costs, and diminished export competitiveness. Business executives from Wesfarmers, NAB, Rio Tinto, and Telstra have publicly urged Treasurer Jim Chalmers to prioritise economic dynamism in the May 2026 budget, warning that inaction risks 'peak Australia'—a permanent plateau in living standards.

Work-related training has surged in prominence as a potential remedy. The Productivity Commission's December 2025 report on building a skilled and adaptable workforce recommended improving recognition of on-the-job learning and easing barriers for small and medium-sized enterprises, which often lack resources to deliver formal training. Complementing this, the Ai Group's Centre for Education and Training released its 'Learning that Works' report in November 2025, highlighting employer investments in workplace learning and calling for ambitious national aims involving governments, businesses, and individuals.

The stakes are concrete: persistent skills shortages affect three-quarters of businesses, with the World Economic Forum noting 65 per cent of Australian employers citing local skill gaps as a major barrier to transformation in 2025. Inaction risks entrenching lower potential output, forcing the RBA toward tighter policy to manage inflation—Australia became the first major central bank to hike rates in 2026 partly due to these dynamics. Yet tensions exist: while on-the-job learning offers flexible, employer-driven upskilling, it competes with formal VET pathways and requires policy alignment to avoid under-investment by cash-strapped SMEs or over-reliance on migration to plug gaps.

Non-obvious angles include the risk that AI adoption, intended to boost efficiency, may instead intensify workloads without corresponding productivity gains if workers lack contextual training to use tools effectively. Reports suggest employees using generative AI often extend hours and broaden tasks, raising burnout concerns rather than delivering sustainable output lifts.