Productivity Commission Media Release
Labour productivity fell by 0.8% across the economy in the June quarter, but rose by a modest 0.5% over the year to June 2024. This marks a return to the weak productivity growth trend of the five years leading up to the COVID-19 pandemic.
“During the pandemic, aggregate productivity rose but then fell as restrictions were eased. This bubble has now well and truly burst, and our productivity level remains at about its 2015–2019 average,” said Deputy Chair Dr Alex Robson.
The Productivity Commission’s Quarterly productivity bulletin – September 2024 shows the rise in the number of hours worked (1.1%) outpaced growth in output (0.2%) in the three months to June.
“Increasing productivity is still the surest path to sustainable increases in real wages and higher living standards,” said Dr Robson.
The report notes that while our overall productivity performance has reverted to pre-pandemic levels, the macroeconomic environment is different from five years ago, with higher levels of labour force participation and a lower unemployment rate.
Hours worked increased by 1.1% in the June 2024 quarter, regaining momentum after falling in the September and December 2023 quarters. Growth in hours worked reflected a 0.8% rise in the number of employed persons and a 0.3% increase in average work hours.
“While there was a brief interruption during COVID, Australia’s productivity deadlock has persisted through two very different economic environments. This suggests policymakers need to pay closer attention to the deeper structural issues at play,” said Dr Robson.
Over the 12 months to June, productivity in the non-market sector declined by 0.7%, while productivity in the market sector rose by 1%.
“Our productivity challenge is broad-based, but it is even greater and more pressing in the non-market sector,” said Dr Robson.
Read the September productivity bulletin
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Is it possible that productivity over the last few years is based upon liquidity issues driven by lack of investment and uncertainties due to climate change and abatement processes, the pandemic, supply shortages and supply chain matters and cost of energy, all leading to severe reduction in consumer spending and overall growth?
These factors could accumulate to a ‘wait and see’ deferral of investment in plant and equipment upgrades, automation and management systems, and R&D. Which could also in turn mean that business returns are more being redirected towards speculation on high yield returns on the stock market per se.
To meet demand fluctuations, many businesses may see it as less risky to engage labour, whether appropriately skilled or not.
Right-i-oh … – The Commission hath …spoken!
But does it make any sense? Have they said anything useful? At all?
Obviously they assess changes in economic performance according to some sort of established set of criteria. But how pertinent are those criteria?
That GDP and its derivates are a rather pointless indicator of economic performance had become somewhat of a commonplace observation – which makes the continued insistence of using it to guide policy so what puzzling.
The attempts to formulate alternatives that I know of are altogether unconvincing. See, for example, the idea of Sustainable Development Goals. Sure, this idea provided ample opportunity for high-falutin paper shuffling! But what else does it provide? Not unambiguous clarity, that’s for sure. And how could it, with 16 separate talking points?