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Jan Bröchner's avatar

Mining is doomed to show low productivity growth as you successively exhaust the better mines.

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Md Nadim Ahmed's avatar

Against Prefabricated Follies: A Case for Structural Reform

I remain deeply skeptical of government procurement schemes or advanced market commitments for prefabricated housing technologies. The notion of prefabricated construction has persisted for over a century, with various enterprises—including Toyota—attempting to render it economically viable. What novel technology or management innovation has emerged to suddenly make prefabricated homes economical when decades of previous efforts have foundered?

If we genuinely seek capital deepening in the construction sector, the solution lies not in speculative industrial policy but in deregulating residential housing, particularly height restrictions. Apartment construction possesses higher capital intensity than individual dwellings—or rather, represents structural transformation toward greater productivity. This constitutes the most obvious path to increased efficiency, as opposed to chasing the chimera of prefabricated housing subsidies.

Regarding service sector productivity, I propose a dual explanation for the paradox of rising productivity amid falling capital intensity. First, the dramatic decline in ICT equipment and software costs means Australian businesses utilize more information technology while paying lower prices, creating the appearance of reduced capital intensity. Second, increased human capital among service workers generates productivity gains without corresponding capital investment, while software serves primarily as a management tool enabling superior workforce allocation.

Given that transport ranks among our top three sectors, certain emerging technologies merit attention. Electric vehicles and autonomous driving represent proven technologies with demonstrable gains. The government should therefore invest in charging infrastructure while maintaining a permissive regulatory environment for self-driving vehicles, welcoming both Chinese and American participants into the Australian market.

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