Treasurer Josh Frydenberg has called on Australian companies to pump profits back into the economy instead of lining the pockets of their shareholders.
Mr Frydenberg has used a speech to the Business Council of Australia to urge companies to shift their focus towards investing in new technologies.
He argued boosting the country’s productivity level to 1.5 per cent would lift the wages of workers by $3000 by the end of the decade.
“Our productivity growth over the last decade has slowed and we cannot simply rely on high commodity prices to boost national income,” the treasurer said in Melbourne on Monday.
Share buybacks and capital returns had become the default option for large corporations but questioned if it was the best thing for future growth, Mr Frydenberg said.
Treasury research shows about 95 per cent of Australian companies have done little to improve their productivity in 15 years while special dividends and buybacks worth billions have become the norm.
“If we are going to create new jobs and enable people to earn more for what they do, we need businesses to increase their capital expenditure and to adopt new technologies and business practices that effectively integrates capital with labour,” he said.
Shadow treasurer Jim Chalmers said simply telling businesses to invest more was not an economic policy.
“Josh Frydenberg has delivered yet another speech that is long on finger pointing and short of a plan,” Mr Chalmers said.
“Having no plan to turn the domestic economy around means the Morrison government is leaving Australia dangerously exposed to volatility in the global economy.”
But Business Council of Australia chief executive Jennifer Westacott said it was more than just a speech.
“It is a crucial signal to companies that the government is backing the economy, backing business and backing investment,” Ms Westacott said.
“Australian businesses are determined to expand, and invest in innovation and their people and they want to see a return on their investment.
“But this is currently being undermined by concerns about the global economy and Australia’s relative competitiveness.”