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Productivity Statistics: 1978–2016
Embargoed until 10:45am  –  22 March 2017
Commentary

See Definitions for explanations of terms used in this commentary.

Key aggregates for the measured sector

The changes in the key variables for the year ended March 2016 showed strong growth in inputs while output growth returned to rates more in line with 2011 to 2014, after a strong rise in 2015. As the growth in total inputs (3.0 percent) was greater than the growth in output (2.6 percent), this resulted in negative growth in labour and multifactor productivity (MFP) and flat capital productivity. This growth had mixed results on the current incomplete cycle, 2008–16.

Labour productivity growth of -0.7 percent in 2016 was markedly lower than the current incomplete cycle average of 0.7 percent, and the long-term average of 1.3 percent. Capital productivity growth of 0.1 percent had a positive influence on the current incomplete cycle average of -0.4 percent, and the long-term average of -0.2 percent. MFP growth of -0.4 percent was lower than the current incomplete cycle average of 0.2 percent, and the long-term average of 0.6 percent.

The table below shows average annual growth rates across growth cycles. The benefit of showing the data in cycles is that we better account for factors that tend to vary within a cycle, such as capacity utilisation. This way, we can make comparisons of productivity performance between periods with the effect of these additional factors minimised. A growth cycle is the span of years between the peak of one cycle and the peak of the following cycle; the 2008–16 period will not be complete until the next peak in output occurs.

See DataInfo+ for more information on growth cycles. 

Key aggregates for the measured sector(1)
Variable 1997–2000(2) 2000–08(2) 2008–16(2) 2016(3) 1996–2016(2)

Percent

Output (value added) 2.9 3.4 1.5 2.6  2.6
Labour input 0.0 2.1 0.8  3.3  1.3
Labour productivity 2.9 1.3 0.7  -0.7  1.3
Capital input 2.4 3.9 1.9  2.6  2.9 
Capital productivity 0.5 -0.4 -0.4 0.1  -0.2 
Total input 1.0 2.8 1.3  3.0  1.9 
Multifactor productivity (MFP) 1.9 0.6 0.2 -0.4  0.6
1. The measured sector series begins in 1996.
2. Average annual growth rates, year ended March.
3. Year ended March.

Output growth driven by contributions of labour input

Growth accounting examines how much of the economy’s growth in output can be explained by one or more of the following:

  • contribution of additional labour
  • contribution of additional capital
  • MFP.

The 2.6 percent increase in output growth in the year ended March 2016 was driven by increased contributions from labour inputs (up 1.8 percent) and capital inputs (up 1.1 percent) which were offset by a fall in MFP (down 0.4 percent). The contribution to output from labour is significantly higher in the latest year than for the latest incomplete growth cycle and the long-term average.

The following graph presents the contribution of additional labour, additional capital, MFP, and growth in output, measured across three growth cycles (the latest cycle incomplete), for the whole series and for the year ended March 2016.

Graph, measured sector contribution to output growth, average annual percentage change, years between 1997–2016.

Small decrease in multifactor productivity

MFP is measured as a ratio of output to combined capital and labour inputs. It reflects growth that cannot be attributed to capital or labour, such as technological change or improvements in knowledge, methods, and processes.

In the year ended March 2016, MFP fell 0.4 percent (following a revised 0.9 percent in 2015) – the first fall since the year ended March 2009. Total inputs grew 3.0 percent, compared with a 2.6 percent increase in output.

In the latest period (2008–16), MFP increased slightly, with an average annual rise of 0.2 percent. Over the same period output grew 1.5 percent, while total inputs rose 1.3 percent a year. Growth in MFP has increased an average of 0.6 percent annually since the series began in 1996. Since then, both output and total inputs (capital and labour combined) have risen (up 2.6 percent and 1.9 percent a year, respectively).

Labour productivity falls in 2016

The -0.7 percent growth in labour productivity in the year ended March 2016 was due to stronger growth in labour inputs (up 3.3 percent) than in output (up 2.6 percent). Provisional data shows the growth in labour inputs for the year ended March 2016 was largely driven by increased labour hours in the construction, accommodation, and business services industries.

See Labour Market Statistics: March 2016 quarter for more information about annual movements.

We will publish detailed labour information for 2016 in next year’s productivity statistics release.

Growth in labour productivity can also be broken down into components. A change in labour productivity can come from two possible sources:

  • the contribution of more capital per hour of labour
  • a change in MFP.

The following graph presents the contributions to labour productivity.

Graph, measured sector contribution to labour productivity growth, average annual percentage change, years between 1997–2016.

In the year ended March 2016, labour productivity decreased 0.7 percent. This was due to 0.3 percent fall in the amount of capital available per worker (capital shallowing) and a 0.4 percent fall in MFP.

The average labour productivity for the most-recent growth cycle, 2008–16 (an incomplete cycle), was 0.7 percent. This was the lowest average cycle growth in labour productivity for the series. Over the same period, capital deepening grew 0.5 percent.

Capital productivity flat in 2016

In the year ended March 2016, capital productivity rose 0.1 percent. Capital input (which includes land, building, machinery) grew 2.6 percent, compared with a 2.6 percent increase in output.

The 0.4 percent a year decline in the growth of capital productivity between 2008 and 2016 reflects strong growth in capital input (1.9 percent a year), compared with lesser growth in output.

Capital productivity can be influenced by how much capital assets are used over growth cycles. See Capacity utilisation in the Definitions section for more information.

An Australia–New Zealand comparison

The data used in this comparison starts in 1996, as this is when the industry coverage of the series are comparable.

New Zealand experienced higher rates of growth in capital productivity and MFP than Australia over the long-run average of the period 1996–2016. Australia had relatively higher growth in labour productivity over the period, with growth in capital-to-labour ratio that was more than double that of New Zealand’s.

 

Australia and New Zealand productivity(1)
Average annual growth rates
1996–2016
Variable Australia New Zealand
Percent
Output 3.4 2.6
Labour productivity 2.2 1.3
Capital productivity -1.4 -0.2
Multifactor productivity 0.7 0.6
Labour input 1.2 1.3
Capital input 4.8  2.9 
Total inputs 2.7 1.9 
Capital-to-labour-ratio 3.6  1.6 
1. Australia's market-sector industries aggregate, compared with New Zealand's measured sector series.
See Datainfo+ for more detail.

For more detailed data see the Excel tables in the 'Downloads' box.

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