American And Japan Are Doing Better Than Australia When It Comes To Productivity

Glenelg beach, Adelaide. Daniel Kalisz/Getty Images

Australia is slipping behind most other developed economies when it comes to productivity.

“There are various reasons for this, including differences in the rate of investment growth,” says Peter Harris, the chairman of the Productivity Commission, giving the latest productivity update.

“But the picture painted in the statistics calls for strong policy attention, particularly in the current era where the recent record terms of trade will no longer support continued income growth.”

Australia’s labour productivity growth for the total economy was 2.2% for the year to the end of June 2013.

However, 2012-13 was the ninth consecutive year of negative or very weak MFP (multifactor productivity) growth in the market sector.

In total, 8 of the 12 industries recorded negative MFP growth in 2012-13. The greatest proportional declines were in information, media and telecommunications (-7.2%), agriculture, forestry and fishing (-5.8%) and mining (-4.9%)

Some of this negative trend reflects a high level of capital investment in mining where new capacity has yet to come into full production.

International data shows MFP (multifactor productivity) in Australia fell by 1.3% in 2013, about the same as the 2012 decline.

This productivity performance was comparable with that of Canada (-1.1%) and New Zealand (-1.2%) but significantly worse than most other developed economies.

Between 2007 and 2011, average MFP growth in nearly all major developed economies was negative.

Australia’s MFP growth (-1.2% per year) was comparable with other resource rich countries such as Norway (-2.6% per year) and Canada (-0.9% per year).

In 2013, global MFP growth was marginally negative (down by 0.1% on average). For Europe, MFP growth remained negative (-0.5%).

However, the United States and Japan recorded positive growth.

Global MFP growth in 2013 continues a trend of recent years in which the rise in the productive efficiency of emerging economies has slowed and in developed economies it has declined.

Here’s the country league table showing Australia deeper into negative territory than anyone else:

Productivity Commission chart.

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