Aspects of Structural Change in Australia

Structural change and associated adjustment issues are central social and economic issues. Reflecting this, the Productivity Commission is undertaking a broad stream of research covering the adjustment and regional consequences of economic change.

The research paper - Aspects of Structural Change in Australia - released today is part of this stream of work. The report provides factual information about structural change in Australia since the early 1970s.

The report compares the direction and extent of structural change in Australia with a selection of OECD and Asian countries, examines the extent and nature of adjustment among Australia's regions and identifies some key developments in Australia's labour market.

As in other countries, Australia has seen extensive changes in its industry composition, employment and investment over the past few decades. Output and employment in the services sector have expanded considerably. Declines in the manufacturing sector's share of output and employment have been greater in Australia than in most other OECD countries. Since 1970, Australia's rate of structural change has been somewhat greater than the average for a selection of 15 OECD countries. However, it has been below that of some countries in our region, including New Zealand and many of our Asian trading partners.

Pressures for structural change have had differential effects across regional Australia. In general, rates of structural change in employment have been higher and more varied in non-metropolitan regions, notably those with a strong reliance on mining activities. The Commission found considerable diversity among regions with high rates of structural change. Some have enjoyed strong growth in population, employment and income. Others have experienced declines in employment, slower rates of income growth and rapid rises in unemployment. Diversity is also evident for regions with relatively low rates of structural change.

The last three decades have seen significant changes within Australia's labour market. Job growth has not kept up with increases in the supply of labour, resulting in considerable increases in unemployment and underemployment. Different patterns of growth across the economy have affected the demand for particular skills with the young, the old, the unskilled and those from non-English-speaking backgrounds affected the most.