The Productivity Commission’s 2023 Bulletin unpacks the 4.6% decline in labour productivity for the 12 months to March 2023, and finds that the decline could be driven in part by the unwinding of COVID-19 related effects, as well as the historically low unemployment rate.
“The COVID-19 pandemic led to a temporary increase in measured labour productivity. With the service sector affected by restrictions, many less productive firms paused operations and higher productivity sectors accounted for a larger share of hours worked in the economy,” said Productivity Commission Chair Michael Brennan.
The Bulletin finds that productivity growth increased across most industries in 2021-22. In agriculture productivity rose due to favourable weather conditions. Growth in other industries, such as transport, postal and warehousing, and information, media and telecommunication may partly reflect the enduring impact of technology adoption.
Citing the recent 5-year Productivity Inquiry, Mr Brennan said that the increased digital capacity Australia developed during COVID-19 could lead to a lasting productivity dividend.
“Government and business should continue to embrace innovation and invest in upskilling the workforce to maintain that momentum,” he said.
The Bulletin also discusses the challenge of Australia’s stagnant non-mining investment. The report surveys some possible explanations for the problem, including structural changes in the economy, shifts in risk appetite and changes in the composition of capital.
The Bulletin highlights that the mining industry experienced a decline in real output and productivity for the second consecutive year in 2021-22. There are potential signs this could reverse, signalling an increase in mining investment with flow-on effects to productivity.
“Higher commodity prices and the global demand for critical minerals could see the start of a new investment phase for mining, which could help drive longer term productivity,” said Mr Brennan.
For a full copy of the Productivity Insights Bulletin 2023, please visit the Commission’s website: www.pc.gov.au
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Key points |
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Data released in June 2023 showed that labour productivity decreased by 4.6% in the 12 months to March 2023. This this is most likely due to the unwinding of COVID-19 restrictions and the historically low unemployment rate.
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Growth in labour productivity and MFP varied greatly across industries in 2021-22.
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This bulletin provides insights into the 2021-22 productivity story.
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