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Microeconomic Reforms and Australian Productivity: Exploring the Links

Commission research paper

Microeconomic Reforms and Australian Productivity: Exploring the Links was released in two volumes on 12 November 1999.

The paper is part of a broad program of research designed to examine issues such as the relationship between microeconomic reform and productivity improvements, the distributions of the gains and the adjustment implications.

The paper lays a framework for exploring the nature and significance of the links between microeconomic reforms and productivity. In addition to examining general trends, it gets behind the aggregates and into the detail of particular reforms and the responses of individual firms and industries.

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The recent surge in Australia's productivity growth is directly linked to past microeconomic reforms, according to a Productivity Commission report released today.

The report, Microeconomic Reforms and Australian Productivity: Exploring the Links, finds that growth in average incomes in the 1990s is back to rates last achieved in the 1950s and 1960s. Australia's rate of productivity growth has been at a record high of 2.4 per cent a year in recent years — double its previous average. There are clear connections between the introduction of reforms, the acceleration in productivity growth and the improved income growth rates.

In addition to analysing broader trends, the Commission conducted more detailed case studies of key manufacturing industries and infrastructure services.

The Commission found that, prompted by a range of microeconomic reforms, the production side of the economy has been undergoing a transformation since the 1980s. The economy has become more flexible and open, with greater exposure to domestic and international competition. Businesses have had to reassess which goods and services they produce and how they produce them. Patterns of employment and investment have changed, with resources freer to move to industries where they contribute more to productivity and output growth.

Improved macroeconomic management has also contributed to the improved productivity performance. Other factors (such as recovery from recession, work intensity) may also have played some role, but cannot explain the strength of the productivity rise.

Background information

Leonora Nicol (Media, Publications and Web) 02 6240 3239 / 0417 665 443

Volume 1

Preliminaries
Cover, Copyright, Foreword, Acknowledgements, Contents, Preface, Abbreviations, Key Points, Overview

1 Scope of the paper

2 Microeconomic reform, productivity and living standards
2.1 Background to economic reforms in Australia
2.2 Objectives of microeconomic reforms
2.3 The implementation of reforms
2.4 Key points

3 Productivity performance
3.1 An historical perspective
3.2 An international perspective
3.3 A sectoral perspective
3.4 Key points

4 What raises productivity?
4.1 A framework of major factors affecting productivity
4.2 Trends in productivity determinants
4.3 Possible explanations for the recent acceleration in productivity growth
4.4 Key points

5 Manufacturing sector case studies
5.1 An outline of main reforms in the three industries
5.2 Increased competition
5.3 Industry responses to pressures for change
5.4 Productivity performance
5.5 Contribution of microeconomic reforms
5.6 Key points

6 Public sector case studies
6.1 NSW rail freight services
6.2 Contracting of Yarra Valley Water civil maintenance services
6.3 Key points

7 The outlook on productivity growth
7.1 The 1990s experience and level and growth effects
7.2 Level effects from reform
7.3 Growth effects from reform
7.4 The outlook

A Background on protection policy and GBE reform
A.1 Reform of protection policy
A.2 Reform of government business enterprises

B A framework of productivity determinants
B.1 Background on the literature
B.2 Broad sources of productivity improvement
B.3 An outline of productivity determinants

C Australian trends in productivity determinants
C.1 Technological advance
C.2 Accumulation of physical capital
C.3 Accumulation of human capital
C.4 Scale, scope and specialisation
C.5 Firm organisation, management practices and work arrangements
C.6 Resource allocation
C.7 Openness
C.8 Competition

References

Volume 2

Preliminaries
Cover, Copyright, Contents

1 Whitegoods
1.1 Introduction
1.2 Australia's whitegoods industry prior to reform
1.3 MER and other influences during the 1980s and 1990s
1.4 MER pressures, strategic responses and outcomes
1.5 Conclusions

2 Automotive industry
2.1 An overview of the development of the automotive industry
2.2 Factors affecting the industry
2.3 Increasing competition
2.4 Industry responses
2.5 Productivity performance
2.6 Role of microeconomic reforms

3 Textiles, clothing and footwear
3.1 An overview of the development of the TCF industries
3.2 Factors affecting the industry
3.3 Increasing competition
3.4 Industry responses
3.5 Productivity performance
3.6 Reductions in protection and productivity

4 NSW rail freight operations
4.1 Background
4.2 NSW rail freight prior to microeconomic reform
4.3 Microeconomic reforms and other sources of change
4.4 Response of NSW government rail freight operators
4.5 Productivity performance
4.6 Assessing the influence of microeconomic reforms

5 Yarra Valley Water
5.1 Introduction
5.2 Background
5.3 Yarra Valley Water's civil maintenance services
5.4 Productivity analysis
5.5 Conclusions

References

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