As we know, Australia has a productivity problem, and it’s starting to bite.

Strong productivity and good growth is the engine that powers an economy. Right now though, the "check engine" light is shining through the proverbial dashboard.

The rate of productivity growth in Australia has slowed to its lowest rate in 60 years. And without a course correction, that's trouble for overall economic growth, wage growth, and living standards in our years ahead.

Good thing we have a government commission looking into it then! Economist-turned Productivity Commissioner Danielle Wood has her marching orders from Treasurer Jim Chalmers to get these numbers up from their anaemic state into something more healthy-looking.

It launched a national ideas drive where businesses could have their say on what they wanted to see in Australia to make life easier. Now the ideas have been tabulated and areas that need fixing are coming into sharper focus.

Among those areas is:

• a revamp of the way the corporate tax system works in Australia;
• the use of AI to drive productivity, and
• how businesses can better comply with environmental regulations, or so-called "green tape".

Reducing the corporate tax rate

One reform bound to catch the attention of business owners is a review of Australia’s 30% corporate tax rate. You don't need me to remind you that it's one of the highest in the developed world.

For small and medium businesses grappling with rising costs and softening consumer demand, the prospect of targeted tax incentives is welcome news. But the focus of the Productivity Commissioner is not on wholesale tax cuts across the board lest it impact the federal budget.

Instead, the focus is on targeted incentives for new capital expenditure for businesses.

Productivity Commission Chair Danielle Wood said this week:

“To get bang for buck we are interested in stimulating new investment in plant, capital, tools and technology,” she told The Australian Financial Review.

There’s good reason to look at tax. Australia’s current rate significantly exceeds the OECD average of around 23%, and critics have long argued it puts Australian firms — especially exporters — at a disadvantage.

Budget neutral or bust

There’s one guiding principle behind all of this new work: the reforms can’t blow a hole in the federal budget.

“We are very conscious of the budget impact of any move,” Wood told The AFR. “So we are thinking of a package that is broadly revenue neutral or doesn’t produce too much of a hit to the budget.”

Cutting the corporate tax rate for big business from 30% to 25% could cost the Treasury around $79 billion over four years. The Commission’s approach is to find ways to offset that — for instance, by pairing any cuts with structural reforms or closing outdated loopholes.

Cutting green tape

The Commission is also taking aim at Australia’s environmental approval system — or “green tape.”

Businesses are being asked to weigh in on how to make it quicker, easier, and cheaper to build clean energy infrastructure, while still meeting national climate goals.

That could mean streamlined approval processes for renewable energy projects, clearer planning frameworks, and new ways to encourage private investment in emissions reductions — all designed to help businesses decarbonise without sinking under compliance costs.

What else is on the table?

Inquiries are also open into:

• Better aged care delivery, with more efficient systems and integrated services;

• Stronger skills development, including better tools and flexibility in training and education; and

• AI deployment, with a focus on practical, safe uses that lift business performance.

Public consultation on all five inquiries is open until 6 June. You can make a submission via the Productivity Commission website.

Here’s the catch

While business groups may be eager for change, the process won’t be quick.

The Commission’s interim reports won’t land until July and August. Then there’ll be another round of public consultation before final recommendations go to Treasurer Dr Jim Chalmers MP in December.

Even then, these are recommendations — not binding policy. The Productivity Commission is an independent advisory body. It can’t make or change laws on its own.

Its job is to put forward evidence-backed ideas. What happens next is entirely up to the federal government, which can act, ignore, or stick the report in a drawer if it doesn't like what it says.