When Geoffrey Hinton, the so‑called 'godfather of AI', declared in 2016 that 'we should stop training radiologists now,' his warning caused a stir. If any job was ripe for automation, surely it was reading medical scans: precise, repetitive, digital work that machines could perform in milliseconds and humans took years to master. Algorithms soon began matching and even outperforming doctors. Venture capital poured into start‑ups promising to replace human diagnosticians. The end of the radiologist looked near.
Yet the opposite happened. Radiology salaries have risen, and Australia's college of radiologists lists dozens of unfilled positions. Far from being replaced, radiologists have become more productive and more valued. Artificial intelligence now handles the drudgery, sorting images and flagging anomalies, while doctors focus on complex cases and patient care. More scans mean more work. Technology did not kill the profession; it made it better.
That story captures what productivity should mean in a modern economy: not working longer hours, but using ideas to make every hour more valuable. Innovation does not just raise output; it can make jobs more interesting and rewarding.
For much of the twentieth century, productivity growth quietly powered Australian prosperity. It lifted wages, reduced hours and expanded opportunity. But over the past 2 decades, the engine has spluttered. Labour and multifactor productivity have flatlined. The causes are familiar: weak business investment, lagging R&D and sluggish adoption of best practice. Productivity is especially hard to lift in people‑centred sectors such as health, education and aged care, where quality matters as much as quantity. But the stakes are high. When productivity stalls, real wages stagnate, budgets tighten and social mobility slows. Lifting productivity is not merely an economic task; it is a moral one.
Reigniting productivity requires what I call the 3 I's: individuals, infrastructure and institutions.
The first is individuals. People‑powered productivity depends on whether Australians have the skills and confidence to use new technologies. That starts in early childhood and continues through school, TAFE, university and lifelong learning. In every field, from accounting to agriculture, productivity now hinges on the ability to work alongside technology rather than against it. Radiologists using AI tools are just one example.
The second is infrastructure. In the past, railways and power lines lifted output. Today it is broadband, renewable energy transmission and data systems. These are the arteries of modern productivity. The National Broadband Network underpins telehealth, remote work and digital exports. The energy transition, too, is an economic opportunity. Renewable power is the cheapest electricity in history. Rewiring the nation with modern transmission will help attract new industries such as green hydrogen and advanced manufacturing.
The third is institutions. Good rules and incentives determine whether innovation spreads or stalls. That is why the government is updating merger laws to keep markets dynamic, curbing non‑compete clauses that trap workers and streamlining clinical trials to get new treatments to patients faster. Strong institutions provide the certainty that lets good ideas diffuse.
Universities sit at the intersection of these 3 I's. They train the people, sustain the infrastructure and embody the institutional culture that makes innovation flourish. On people, universities produce graduates whose skills ripple through the economy. A recent study by Tom Karmel at the Mackenzie Research Institute found large bachelor‑degree earnings premia: 53 per cent in science, 68 per cent in engineering. Education pays, both privately and socially.
On infrastructure, universities maintain the laboratories, libraries and data systems that make breakthroughs possible. Few private firms could afford to build them alone, yet they underpin discoveries in health, energy and defence. On institutions, universities model open inquiry and international collaboration, the channels through which knowledge travels. They are diffusion engines, helping new ideas move from the lab to the marketplace.
Right now, too many good ideas fall into the 'valley of death' between discovery and commercialisation. The government is helping bridge that gap through the National Reconstruction Fund and Trailblazer programs. But cultural change matters too: more movement of people between sectors, more joint appointments, more investors backing early‑stage technology. Public procurement can help by acting as a first customer for local innovation. Germany's Fraunhofer Institutes offer one model of how applied research can bridge lab and factory floor.
As economist Joshua Gans notes, if radiologists were the canaries in the coal mine for AI, the canary is alive and thriving. Technology did not replace them; it amplified their value. The same can be true across the economy if we make the right investments in people, infrastructure and institutions. Productivity is not about squeezing more effort from workers. It is about creating more value from effort, turning disruption into discovery. When productivity rises, so do wages, living standards and opportunities. We get shorter hospital queues, cleaner energy, faster commutes and new industries we have not yet imagined.
At its heart, productivity is not an economist's abstraction. It is the secret sauce of national progress: how we make work more rewarding, communities more dynamic and the future more abundant.
