The Economic Perspective 17 October 2025

The Latest Trending Economic News Curated for You by Balmoral Group Australia

Good morning dear readers,

This week, the Nobel Prize in economics was awarded to Joel Mokyr, Philippe Aghion and Peter Howitt for identifying mechanisms underlying sustained growth. The research identifies technological innovation as a key driver when backed by accurate scientific understanding, allowing technology to be co-opted and improved. The theory of “creative destruction” was also introduced; new, innovative products enter a market and outcompete older institutions – highlighting the importance of properly managing “destruction” to ensure incumbents and interest groups don’t block innovation.  

This week’s articles follow the theme of productivity growth and “creative destruction”. Our first article summarises the RBA’s updated productivity estimates, finding that Australian productivity growth is stagnating due to subdued market competition. Next, the minerals sector needs to reorganise and embrace new technology in order to stay afloat, and the European Union has scaled-back their climate reporting laws, concerned over possible impacts on competitiveness. The final article argues that Australia’s shift away from fossil cars towards EVs is too slow, and strong policy is needed to dispel market inertia. I’ve included a map form the RBA, demonstrating that Australia’s potential output growth is slowing, a clear sign of declining productivity.

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Hope you enjoy the articles and have a great weekend!

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Why Productivity Matters for Central Bankers 

The RBA has downgraded their medium-term productivity growth assumption from 1.0% per annum to 0.7% due to slowing productivity across all sectors. This slowdown is attributed to lack of competition, resulting in low market dynamism (resources aren’t reallocated to productive firms as fast) and slow technological diffusion – among other factors. Effects include slow growth of potential output, meaning higher risk of inflation during consumption spikes, although consumption has also been slowing. Read more here.

Accelerating innovation through collaboration: a sustainable future for Australia’s resources sector 

Australian minerals sit at the intersection of various changing tides: decarbonisation, automation, and AI. Demand for energy transition minerals has spiked and AI and robotics research are helping to bring automation to complex mining sites. Collaborations such as the $10 million Green Metals Innovation Network (GMIN) are decarbonising mineral processing and developing tech for green steel production. CSIRO emphasises the importance of collaboration between industry and research in navigating these research priorities. Read more here.   

EU Lawmakers Scale Back Sustainability Rules, Raising Thresholds for Corporate Reporting and Due Diligence 

The EU’s Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD), both of which enforce transparency and compliance, have been reduced. The CSRD will now only affect larger firms of 1,000 employees, up from 250, and the CSDDD will only affect firms of at least 5,000 employees. Both laws have already delayed due to concerns by industry, and these recent scope reductions follow from European competitiveness concerns. Read more here.

Banning combustion engine cars by 2035 will be necessary to get Australia moving on electric vehicles 

By 2030 transport is projected to be Australia’s largest emitter, and a speedy phase-out of fossil cars is necessary to meet the Government’s 2035 emissions reduction goal of 60-72%. The Electric Vehicle Council has requested ending fossil car sales by 2030, in line with major trading partners such as China, where EVs compose 51% of cars. In Australia, EVs are only 2% of stock – we’ll need policy crackdowns in order to accelerate the shift. The EU passed similar laws, mandating zero emissions for all cars and vans sold after 2035 (with some exceptions for synthetic low-carbon fuels). However, safeguard mechanisms to prevent backsliding are necessary, and Australian policy-makers see a ban as politically risky. Read more here.

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Potential Output Estimates from the RBA

The Royal Bank of Australia (RBA) has found that growth in potential output, the supply capacity of the economy, is expected to slow relative to previous years. This could mean higher risk of inflation, sustained weak consumption, or no impact at all. However, it is clear that innovation and market competition in Australia are structurally weak and must be energized by policy reform.  

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