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PC News - October 2015

Australia's productivity performance

In 2013-14, Australia's measured productivity increased overall. But growth among industries was uneven, with productivity declining in some sectors.

The latest issue of the Productivity Commission's Productivity Update was released in July 2015. The Update provides a snapshot of key nation-wide and industry-specific productivity trends from the most recent release of ABS productivity statistics.

In 2013-14, labour productivity growth in both the Australian economy and the 12-industry market sector (which accounts for 65 per cent of the economy) was slightly above the trend of the last two and half decades. However, growth of multifactor productivity (MFP) remains below the longer-term average.

And there were mixed results for MFP growth across industries.

Productivity growth among industries is uneven MFP growth 2013-14

Positive growth %
Accommodation and food services +1.1
Retail trade +1.5
Wholesale trade +3.1
Information, media and telecommunications +3.1
Financial and insurance services +3.3
Arts and recreation +5.4
Negative growth %
Agriculture, forestry and fishing -0.1
Mining -0.1
Manufacturing -0.3
Construction -0.7
Transport, postal and warehousing -3.1
Electricity, gas, water and waste services -5.4

The Financial and insurance services industry has long been a strong source of productivity growth, particularly in terms of multi-factor productivity. But its performance has varied significantly in recent years.

PC Productivity Update suggests that much of this variability may be attributed to big swings in the Insurance, superannuation and auxiliary services component of the industry.

Investment in new capital has played a key role in lifting Australia's labour productivity by supporting the introduction of new technologies and improving ways of working.

The Update highlights the importance of efficient investment in public infrastructure - an area in which governments at all levels are not always following processes needed to ensure that the most socially beneficial projects are selected, and that funding or pricing mechanisms align those investments with the preferences of consumers.

The Update outlines recent work by the Commission aimed at improving the efficiency of public infrastructure investment.

Efficient capital investment can help boost growth

  • The key components in efficient public infrastructure investment are:

    • Project selection: rigorous cost-benefit analysis
    • Development and finance: drawing on the private sector, where opportune
    • Funding of ongoing operations: efficient user pricing.
    'Smart investment decisions and productive use of the asset will make a big difference in future economic growth. More can be done to improve decision making in the provision and use of public infrastructure.'
    Productivity Commission Chairman Peter Harris

* A complete list of draft recommendations are available in the report overview.

PC Productivity Update 2015

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