The Productivity Puzzle – September 2011

Commentary on labour productivity growth. Labour productivity growth has slowed markedly in recent years, prompting calls for further economic reform. […]

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Commentary on labour productivity growth.

  • Labour productivity growth has slowed markedly in recent years, prompting calls for further economic reform.
  • There is evidence that the mining and utilities industries may have been responsible for around half of this slowdown. This may reflect delays in high levels of new investment coming on stream and the strength of commodity prices in mining.
  • Weaknesses in GDP growth (including the GFC) may also have played a role, encouraging firms to hoard idle time in their production processes.
  • Declining real unit labour costs may also be encouraging more labour-intensive production.
  • If structural productivity growth has not slowed, labour productivity growth is likely to recover in coming years.
  • Ongoing reform of the Australian economy in such areas as competition, health and education will be beneficial in helping the structural adjustment currently underway.

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