September 23, 2026

Australia's Productivity Problem, Seen From Inside Its Tech Industry

A couple of years ago I wrote about why Australia struggles to build a thriving tech ecosystem. Since then I’ve spent more time building systems inside Australian companies, including a large bank, and I’ve come to think the tech problem is a symptom of something bigger. Australia has a productivity problem, and most of what frustrates people day to day (housing, wages, the cost of groceries) traces back to it.

I want to be upfront about two things. First, I want this country to do well. I’ve built a career and a life here, and I think Australia has more going for it than almost anywhere. Second, this is my view from where I sit. I’m an engineer, not an economist, and I don’t have the full history of how every policy came to be. Treat this as one practitioner’s read of the incentives, and tell me where I’m wrong.

How we got here

For roughly two decades Australia had a very good deal. China’s growth drove demand for our iron ore, coal and gas, and mining grew to around 14% of GDP. The tax revenue from that boom paid for a generous social safety net. Strong population growth through migration added to headline GDP every year.

That model worked while it lasted. The problem is that it let us skip the harder work of becoming more productive. The Productivity Commission has described the last decade as the weakest stretch of productivity growth in 60 years. Real wages went backwards after 2022 and households are still catching up, and a large share of recent jobs growth has come from the government-funded “non-market” sector (health, care, education and public administration) rather than from businesses competing in open markets.

Tech is where this shows up most clearly for me. Australia has somewhere around 9 unicorns for a population of 27 million, about 0.3 per million people. The US has roughly 700, or about 2 per million. We produce excellent engineers. We just don’t keep enough of them, or give them enough reason to build here.

What I think is holding us back

1. The tax system punishes the people we most need to keep

Australia’s top marginal rate is 45% plus the 2% Medicare levy, and it applies from $190,000. That is not an unusual salary for a senior engineer, a specialist doctor or a founder a few years into a successful company. A small group of high earners already carries a large share of the load. Roughly the top 3 to 4% of taxpayers pay around a third of all personal income tax.

Those people are also the most mobile. They get offers from the US, Singapore and the Gulf, and every one who leaves takes their tax contribution and their ability to start companies with them. Replacing that cohort through migration is slow and expensive. Keeping them is much cheaper.

Equity is part of this too. Employee share schemes have improved, but they are still more complicated and less generous than in the US. That makes it harder for startups to compete for talent with the one currency they have plenty of.

2. We pay subsidies into markets that can’t grow supply

When the government adds demand to a market where supply can’t respond, prices rise. Housing is the clearest example: first-home buyer grants and strong population growth push on a housing supply that is constrained by zoning and slow approvals. The result is some of the worst price-to-income ratios in the developed world.

Negative gearing and the capital gains discount often get blamed for this, but I think they do the opposite. They’re what makes it worthwhile for private investors to fund new builds and hold rental properties, and most of Australia’s rental stock is owned by individual investors. Take those incentives away and you get fewer new dwellings and fewer rentals, which pushes rents up for exactly the people the change was meant to help.

Norway is a useful counterexample. Interest on borrowing is fully deductible against income there, including interest on your own home loan, which is more generous than negative gearing is here. Yet Norway has a home ownership rate of around 80%, well above Australia’s. Tax deductions for property investment clearly don’t lock people out of owning a home on their own. How much housing a country actually builds matters far more.

The same demand-side pattern shows up in childcare and other subsidised services. Subsidies feel like help, and for an individual household they often are. Across the whole economy, when supply is fixed, they mostly turn into higher prices. I’d much rather see the effort go into supply: keep the incentives that bring investment capital into housing, speed up approvals, allow higher density near transport, and build infrastructure that opens up more land.

3. Leadership pipelines run on networks more than merit

I called this the “mate-o-cracy” in my last post, and I still think it’s one of the most underrated problems in Australian business. Look at the boards and executive teams of large Australian companies and compare them with US tech companies. The US lists are full of people who arrived as skilled migrants and rose on performance. Ours draw from a much narrower set of schools, suburbs and networks.

In my experience, highly skilled migrants in Australia often plateau below senior leadership. That is a loss for the companies involved, because they are leaving capability on the table. It’s also a loss for the country, because those people eventually leave for places where the ceiling is higher.

What I’m asking for is simple: clear promotion criteria, applied the same way to everyone, and decisions made on the work.

4. Tall poppy syndrome makes honest disagreement expensive

Every engineering leader knows that teams do their best work when people can say “I think this is wrong” without it costing them. Google’s research on psychological safety made this mainstream. In Australia, the cultural instinct to cut down people who stand out works directly against it.

I’ve seen it inside organisations. People who point out that a project is failing, or that a team is three times larger than the work requires, learn to stay quiet. Consensus beats evidence in the room. Over time you get organisations with far more people than the work needs, and nobody willing to say so. At a national level the same instinct makes it hard to have an honest public debate about any of the issues in this post.

I don’t think you can legislate culture. Leaders can model it, though: reward the people who raise problems early, and treat disagreement as useful information instead of disloyalty.

5. We’re not competing for talent hard enough

Australia’s skilled visa system is slow and complex, and permanent residency pathways can take years even for people earning well above the median. Meanwhile, the mix of our migration intake has drifted toward student visas and lower-wage work, with work rights that often have little to do with what people came to study.

It’s worth looking at what’s happening in India. Senior engineers at top global companies in Bangalore can now earn US$150,000 or more, and the ecosystem there is growing fast. The talent competition in our region is real, and we are not winning it by default.

What I’d change

If I could pick the priorities, these are them:

  1. Lower marginal tax rates, especially at the top. Raise the threshold for the top rate and bring it down so it’s competitive with the places our best people are moving to. Make employee equity as simple and tax-efficient as it is in the US.

  2. Fast-track skilled migrants. If you’re earning $200,000+ in Australia on a skilled visa, permanent residency should be a formality processed within a year. Rebalance the migration mix toward skilled roles, and tie student work rights more closely to the field of study.

  3. Build housing supply, and stop subsidising demand. Faster approvals, higher density near transport, and no new demand-side grants that simply lift prices.

  4. Make 30-year fixed-rate mortgages possible. Most Australian mortgages are variable, which leaves households exposed to every rate cycle. Long fixed-rate products would give families much more certainty. The US can offer them because of government-backed mortgage securitisation, and Australia would need something similar.

  5. Build high-speed rail on the east coast. Connecting Brisbane, Sydney, Canberra and Melbourne with fast rail would make it practical to live in regional cities and work in the capitals. That is one of the few levers that directly takes pressure off housing. The High Speed Rail Authority exists, so the next step is to fund construction.

  6. Make merit the explicit standard for promotions. Transparent criteria and consistent bars, in companies and on boards. This is how you get genuine diversity too, because it removes the network advantage.

  7. Shrink the gap between what people pay in and what they get back. A large share of working households currently receive more in government benefits than they pay in income tax. That makes it hard for any government to reform, because every change creates losers. Growing private-sector jobs and wages is the only sustainable way out, and that brings us back to productivity.

Why I’m optimistic anyway

None of this is inevitable. Australia has political stability, a strong legal system, world-class universities, a location next to the fastest-growing region on earth, and companies like Atlassian and Canva that prove world-class tech can be built here. I’ve worked at both, and I’ve seen what Australian teams can do when the incentives line up.

The countries that win the next twenty years will be the ones that make it rewarding to build, hire and stay. Australia can be one of them. It needs to pick productivity over the easy wins, and it needs to get comfortable with people saying uncomfortable things out loud.

I’d genuinely like to hear where you disagree. If you have data that points the other way, please share it in the comments.