Australians are feeling poorer because wages, productivity and household incomes have been squeezed for years, financial journalist Alan Kohler has warned, saying the outlook for the country’s economy remains troubling.
Writing for the ABC on Monday, August 31, Kohler argued that Australia’s economic malaise was being obscured by optimism about artificial intelligence and repeated calls for closer cooperation between the government and business.
His warning followed the Business Council of Australia’s annual dinner, where Prime Minister Anthony Albanese and business leaders urged a stronger partnership to lift investment, productivity and living standards. Kohler said the approach risked overlooking the deeper reasons many households felt worse off.
Australia’s productivity problem is worsening
Productivity growth averaged more than 2 per cent a year during the economic reform period of the 1980s and early 1990s. By contrast, the average for the current decade has fallen to about 0.3 per cent, while productivity declined by 0.7 per cent in the 2024-25 financial year, according to figures cited by Kohler. ([abc.net.au](https://www.abc.net.au/news/2026-08-31/declining-productivity-bca-unions-ai-future/107095052))
He linked the deterioration to falling real wages and a prolonged decline in per-capita household income after inflation. Business investment growth has also weakened, dropping from 2.2 per cent in 2015 to zero in 2025, while the share of national income going to profits has risen and the labour share has fallen. ([abc.net.au](https://www.abc.net.au/news/2026-08-31/declining-productivity-bca-unions-ai-future/107095052))
Kohler argued that workers who are going backwards financially are unlikely to become more productive, rejecting the idea that financial pressure alone provides an incentive to work harder. He said the result was a combination of declining productivity, rising inequality, generational frustration and political polarisation.
The commentator contrasted the current defensive mood with the reform era under former Labor treasurer Paul Keating and ACTU secretary Bill Kelty, when government and organised labour worked together on changes including enterprise bargaining, tariff cuts and compulsory superannuation.
With union influence now much weaker, Kohler said business groups and lobbyists held greater sway over national policy. He warned that the focus on protecting existing interests had replaced the willingness to pursue major economic reform.
Artificial intelligence is now being presented as the main source of hope for lifting productivity and living standards. But Kohler cautioned that the technology could also threaten jobs and deepen economic instability if governments failed to prepare for its impact.
His comments came as the Reserve Bank of Australia maintained its cash rate at 4.35 per cent on August 11, saying inflation remained too high and that a period of subdued economic growth was needed to bring price pressures under control. ([rba.gov.au](https://www.rba.gov.au/speeches/2026/mc-gov-2026-08-11.html?utm_source=openai))
