In America, where the markets for capital goods and labour are vastly more flexible than in Australia, manufacturing productivity is nearly twice as high. This means we have a lot of catching up to do. The loosening of our labour markets has meant that companies are now much freer to bring about more efficient labour capital combinations, a process that has been greatly assisted by the reduction in tariffs. This is because tariffs misdirect production and absorb capital at the expense of more efficient industries. The basic point here is that though rearranging capital and labour into more efficient combinations is to be welcomed and encouraged it is not growth.
Growth comes from capital accumulation which in turn springs from savings.
Therefore a genuinely growing economy is one which is fuelled by rising per capita investment. It is this that ultimately raises productivity and living standards. However, Keynesianism has turned this insight on its head. The result is that economic commentators and advisers now view consumption as the economy's real driving force. But these people have forgotten that growth is forgone consumption.