Macroeconomic policies can provide a measure of counter-cyclical stabilisation, but they can’t serve as a magic bullet to achieve sustained growth in living standards. And with the terms of trade-driven improvements now behind us – and at least partly reversing – productivity is the main game.
Gains in productivity come in part from improvements to the way we do the things we currently do, in part from stopping doing things we are not very good at and doing more of things we are good at. It’s understandable that this is often seen as a threatening notion and it is certainly disruptive when adjustment has to happen in a short period.