Productivity Commission: Reinvigorating productivity growth is a national priority

LABOUR productivity declined by 0.5% in the September quarter and by 0.8% over the year, according to the Productivity Commission’s (PC) latest quarterly productivity bulletin.

“The immense disruption from COVID-19 inflated a short-lived productivity ‘bubble’ which has since burst. Labour productivity is now back to where it was during the stagnant 2015 to 2019 period leading up to the pandemic,” PC Deputy Chair Alex Robson said.

“Over the medium to longer term, higher productivity growth also underpins fiscal sustainability.” 

Labour productivity dropped in both the market and non-market – meaning government-dominated – sectors during both the quarter and the year.

“The data underscores the point that reinvigorating productivity is a national priority. Even small changes that make the economy more dynamic and efficient can deliver big economic dividends and add up to major improvements in real wages and living standards over time,” Dr Robson said.

“But it’s not all doom and gloom. Today’s economy is, in some ways, stronger than the pre-pandemic economy was. This is most evident in the jobs market, where Australia now has higher labour force participation and lower unemployment,” he said.

The PC’s latest bulletin also compared Australia’s recent productivity performance to that of the United States.

James Thiris, a senior research economist at the PC, said the much discussed "great productivity divide" between Australia and the US – where productivity growth is booming – is not as wide as it first appeared.

Mr Thiris argued this ‘divide’ was partly because Australia and the US report different measures of headline labour productivity, and in addition must be seen in the context of the very different post-pandemic labour markets in the two countries and the different ways they supported workers during the COVID-19 pandemic.

“Australia protected existing jobs and businesses during the pandemic, which reduced disruption but may have prevented some workers from moving to more productive jobs in a quickly changing economy,” Dr Robson said.

“The US supported workers with unemployment benefits, which led to higher unemployment but may have boosted productivity by allowing unproductive businesses to fail.”

www.pc.gov.au

 

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