Australia's Productivity Surge and its Determinants
This paper by Dean Parham was presented at the National Bureau of Economic Research (NBER) East Asian Seminar on Economics held in Melbourne 20-22 June 2002.
There has been a marked improvement in Australia’s productivity performance since the early 1990s. Underlying labour productivity and multifactor productivity (MFP) growth both accelerated by at least 1 percentage point.
Three major possible explanations have been put forward: a response to policy reforms designed in large part to improve Australia’s productivity performance, increases in workforce skills, and the use of more advanced information and communications technologies (ICTs).
Although increases in skills from the 1980s may have had indirect and long-term productivity benefits, it seems there was no acceleration in the demand for skills in the 1990s to directly match the productivity acceleration.
The paper examines the contribution of ICTs in a productivity growth accounting framework. Using the USA as a benchmark, 2 or at most 3 tenths of a percentage point of the MFP acceleration is attributed to use of ICTs.
Australia does not produce sufficient ICTs for productivity gains from ICT production to show up at the aggregate level. This leaves 0.8 of a percentage point or more of Australia’s productivity acceleration to be attributed to much-delayed catch-up that has been promoted by policy reforms.
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2 An overview of Australia's productivity performance
2.1 A broad sweep across countries and decades
2.2 The productivity surge in the 1990s
3 Explanations for the productivity surge
3.1 Policy reforms
4 The role of ICTs and other factors in Australia's productivity surge
5 An industry perspective