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PC Productivity Update 2016

Foreword

Productivity Commission chairman, Peter Harris

Welcome to the PC Productivity Update 2016.

This issue of the Update reports on Australia's productivity performance 2014-15. This financial year recorded positive growth of labour productivity (LP) in both the whole economy (1.0 per cent) and the market sector (1.9 per cent). In the meantime, multifactor productivity (MFP) growth in the market sector (0.8 per cent) was the highest in recent years.

In 2014-15, most industries in the market sector exhibited positive productivity growth which is encouraging. Of these industries, MFP growth in Mining (5.5 per cent) was the highest, reflecting the transition of this industry from the 'investment phase' into a 'production phase'.

Despite the positive growth in real production (GDP per capita grew by 0.8 per cent) in this financial year, growth of Australia's per capita income was negative (-0.9 per cent), largely due to a deterioration of the terms of trade (-2.3 per cent). Australia's terms of trade has been on a downward trend since 2012, although in 2014-15 it was still 26 per cent above the historical average over the last five and half decades. If the current trend persists into the future, it will continue to exert downward pressure on the per capita income in Australia.

We welcome your feedback on this edition of the Update.

Peter Harris
Chair

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