Australia's 2025 Election - What's Next?

In the aftermath of Australia's 2025 federal election, Treasurer Jim Chalmers made it clear where the economic focus of Labor's second term would be. Appearing on Insiders, he summed up the shift: "The best way to think about the difference between our first term and the second term that we won last night, first term was primarily inflation without forgetting productivity, the second term will be primarily productivity without forgetting inflation."

This focus on productivity isn't partisan – Shadow Treasurer Angus Taylor previously stated that "restoring our living standards can only come from an expansion of the productivity capacity of the economy." With the election behind us, it's worth exploring what this productivity focus means for organisations, particularly in technology and cyber security.

The productivity problem

Productivity growth – producing more output from the same inputs – drives improvements in real wages, economic expansion, and living standards. It's the key to sustainable prosperity, whether at the level of the economy, a sector, an organisation, or individual workers. Contributing to productivity growth can be as simple as automating an old process, or as complicated as reforming our Federation’s tax system. 

Productivity growth drives long-term improvements in real wages, economic expansion, and ultimately, our living standards. As the Business Council of Australia notes, productivity growth and real wage growth are inextricably linked.

Unfortunately, Australia's productivity story has been dismal. At the end of 2024, productivity sat roughly where it was at the end of 2016, after a temporary rise during COVID and a subsequent slump. The RBA and policymakers have consistently been over-optimistic about where productivity would rise to at any point in time, as evidenced by the forecasts in their Statements on Monetary Policy:

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Diagram: Productivity & RBA forecasts - from Nov 2024 RBA SMP 

This stagnation is a serious problem. Without productivity growth, we cannot meaningfully increase our living standards, which have been static on a per-capita basis. Simply put, we need productivity to earn more and pay less.

Why Has Productivity Growth Declined?

There a few perspectives among economists:

1. The RBA has pointed out productivity growth in the mining sector particularly weakened during 2024 (coming from a high base of productivity);
2. Industries like healthcare and social care have lower measured productivity than average, so when these “non-market” sectors grow (like they have in recent years), then that reduces measured productivity growth;
3. There's been less competition, with fewer new firms entering and existing ones exiting markets. Australia isn't effectively attracting start-ups to its ecosystem, focusing instead on preventing departures (primarily to the United States). Regulatory barriers, especially in construction, are frequently cited as inhibitors.
4. It’s taking longer for people and capital to move from less efficient businesses to more efficient ones, and for those businesses to reach the cutting edge of what businesses are doing internationally.
   [Note: We cannot help but point out we are one of those newer, more efficient businesses the RBA is talking about - so we have our own role in the productivity puzzle!] 
5. Critically, Australian businesses aren’t keeping pace with leading global companies when it comes to innovation and substantially lag their global peers on the uptake of new technology. The Treasury notes competitive pressure is another lever to increase productivity growth, as “new firms that are more likely to adopt and invest in newer technologies, and incumbent firms [are] forced to improve their production processes or exit the market”. The chart below shows Labour productivity in Australian and Global leading services firms between 2002 and 2016:
   
   

It’s not a pretty picture, made less so by the Services sector continuing its inexorable growth from about 77% of Australian employment to about 81% just over the period covered by this chart. 

What’s the answer?

While productivity improvement requires action across multiple fronts, we'll focus on areas where technology leaders and our expertise as a cyber security, privacy, and data/AI governance firm can contribute meaningfully:

1. Accelerate technology adoption

As the RBA’s chart above illustrates, even the most innovative Australian companies have consistently underinvested in and underadopted technology compared to global leaders. The productivity gap between Australian and global frontier firms in the services sector has widened significantly for more than a decade.

AI solutions can’t perform all tasks well, and it is too expensive, slow, or inaccurate for some applications - so it can’t be the only type of technology businesses invest in. With that caveat, AI does stand out as a transformative technology that can dramatically enhance productivity across sectors. However, many organisations can approach their AI implementation with excessive caution or, conversely, without sufficient governance guardrails.

The key is finding the right balance – accelerating adoption while ensuring appropriate safeguards. This means:

• Identifying high-value use cases where AI can eliminate low-value work and augment human capabilities in lower-risk areas
• Developing pragmatic evaluation frameworks that enable quick assessment of AI tools and vendors
• Creating clear paths to implementation that include appropriate governance without unnecessary delays

Organisations that find this balance will gain significant competitive advantages. Research into the use of 18 month old LLMs (they are much better now) showed AI-powered tools were boosting knowledge worker productivity by 20-40% in certain tasks – a productivity leap that Australian organisations just cannot afford to miss. With agents, computer use, and other automations around the corner, that use case is just the start.

We’d add one caveat - that while organisations can gain a lot from adopting AI products and tools, in the long term it’s important for companies to build your own capabilities and products in your areas of core business so that you’re the one capturing the value that’s created - not someone else.

Treasurer Chalmers’ reinforced the new Government’s view on AI during his Insiders interview, saying: “We've got to do more to embrace technology, particularly the AI opportunity”. 

2. Cyber security, privacy, and governance functions that enable speed

Cyber security, privacy, and AI/data governance functions within organisations have earned a reputation – often deserved – for slowing technology adoption. There are some understandable drivers - cyber security is an ever-increasing threat environment, privacy is seeing increased regulatory complexity and expectation, and AI adoption can feel like the wild west. But cyber, privacy, and AI governance functions are at their best when they’re actively working to find ways to enable technology adoption at speed. Some already act this way, but many have work to do.

The resilience these functions can help build can enhance productivity through reduced costs and more sustained outputs in the face of risk. But if we want to be a part of changing Australia’s productivity story, we need to do better at enabling technology adoption apace. 

This means:

• Shifting from "no, because" to "yes, if" in security and privacy discussions around new technology
• Developing adaptive governance frameworks that scale with the risk profile of specific AI use cases, and encouraging experimentation in lower-risk areas
• Implementing automated compliance tools that reduce slow, manual assessment burdens
• Creating clear security and privacy guidelines for AI procurement and implementation that business teams can easily follow
• Embedding security and privacy expertise within technology implementation teams, rather than positioning them as external gatekeepers

The most effective security, privacy, and AI governance approaches today are those that balance appropriate controls with the need for speed and innovation. They protect what matters most while enabling the business to move forward confidently.

3. Make our functions more productive and cost-effective

It would be hypocritical to advocate for productivity improvements while our own industry remains inefficient. Cybersecurity, privacy, and governance functions themselves need to become more productive and cost-effective - to do more with less. 

This means:

• Standardising and streamlining governance processes to reduce the "governance tax" on new initiatives - particularly in similar risk areas that share controls
• A pragmatic focus on resources deployed towards genuine risks rather than theoretical edge cases or compliance checkbox exercises
• Building modular, reusable security and privacy components that can be rapidly deployed for new systems (particularly as new classes emerge)
• Rationalising tooling and capability to focus on those most able to assist you to prevent and detect real harm.
• Measuring and optimising the productivity of security and privacy functions themselves
• Leveraging AI and automation for routine security tasks, compliance, and identifying vulnerabilities

The more productively we can deliver appropriate security, privacy, and governance, the more resources organisations can direct toward innovative, productivity-enhancing initiatives.

Our path forward

Australia's productivity challenge is substantial, but it’s something that each of us can play a role in contributing to the solution of. Faster and increased adoption of technology could help us close the productivity gap with global leaders – if we can overcome our adoption hesitancy and implement them responsibly and securely.

For leaders and professionals in our fields, this means reflecting on how you and your functions operate. Are you enabling or hindering technology adoption? Are your processes designed for speed and safety, or just risk minimisation? How are you measuring your own team's productivity, and what are you doing to shift it?

The government's focus on productivity provides an ideal moment to transform how we approach technology adoption and governance. By embracing new technology fast, but responsibly and efficiently, Australian organisations can contribute to reversing our productivity decline and ensure sustainable prosperity.

The future belongs to organisations that can both innovate rapidly and build trustworthy and resilient systems. If we get it right, everyone will benefit.

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Germane Advisory helps organisations navigate the cyber, privacy, and AI risks of technology adoption, realising productivity benefits while governing risks effectively. Contact us to discuss how we can support your transformation journey.