Any improvement in the nation's sluggish wage growth probably rests with Australia's growing services sector.
In a new report, the Productivity Commission estimates the services industry now accounts for 90 per cent of Australian employment and 80 per cent of economic output.
"If Australians are to experience ongoing wage and productivity growth, it will have to come largely from service industries," the commission says.
It says the rise of the sector over the past 70 years, and the associated displacement of manufacturing, has raised fears of worsening labour market conditions, slower wage growth and slower productivity growth.
"Such fears are misplaced," it says.
"Some perceive service sector work as being poorly paid, yet services employees are paid more on average per hour than manufacturing workers. And services sector jobs overall are no more likely to be casual than other jobs in the economy."
However, given the diversity of the sector - from cleaning to medicine - it does mean its industries operate in very different ways to each other and the characteristics of some can limit the scope for productivity growth.
However, digitisation is increasingly being used to overcome barriers to improvements in service sector productivity.
"Technology is enabling services to be provided remotely, accelerated by forced changes during the COVID-19 pandemic," it says.
For example, doctors are increasingly providing telehealth consulting, restaurants are joining online delivery platforms and office workers are using flexible work arrangements.
"These are the sorts of technological innovations that increase household and firm choice, driving productivity and quality-of-life improvements," it says.
Lifting wage growth is one key aim of the Reserve Bank as it seeks to normalise inflation to be able to lift interest rates from record lows.
Australian Associated Press
