Overview & Comments

Some key findings from the study show:

• There was a clear acceleration of growth of labour productivity in Australia in the 1990's and beyond compared to the 1980's.  From 1992-2004 labour productivity grew at an annual rate of 2.32% compared to 1.59% for the earlier period from 1980 to 1992.
• Services sectors have dominated this growth, and the high performers were:
  • financial intermediation (deposit, credit granting, financial leasing, factoring and credit card merchant services);
  • wholesale trade; and
  • the miscellaneous group encompassing transport, machinery and equipment hire, hotels and catering, R&D, legal, technical and advertising.
• Agriculture was a significant contributor to the acceleration between the two periods.
• Mining and quarrying played an important role, but is not a key sector in the productivity surge during the high growth period.
• Communications played a substantial role in between the two growth periods, but its contribution to the overall surge is low because of the decline in influence from 1998 onwards.
• These findings are comparable to an analysis conducted by Professor Solow for the McKinsey Global Institute on aggregate productivity growth for the US

The implications for productivity growth can be highlighted as follows:

• It is the high technology using sectors rather than the high technology producing sectors that are the key component drivers of productivity growth both in Australia and the USA.
• The development and application of information technologies, together with investment in management capabilities and other organisational and often intangible assets are behind the transformations experienced by the sectors contributing most to Australia's recent productivity growth;
• Examples for each of the highest contributing sectors are:
  • financial intermediation/insurance - benefited from major regulatory reforms, but also among largest investors in information and communications technologies;
  • wholesale trade - benefited from the introduction of large scale technologies such as bar-coding and scanning, and increased competition and regulatory reform induced rationalisation through a series of mergers and acquisitions;
  • communications - benefited from rapid technological advances and increased demand due to falling prices, also a large investor in technology in 1990s.
  • agriculture - benefited from new technologies in farm machinery, herbicides/fertilisers and genetic modification.  Regulatory reforms also improved performance in several sectors.
  • mining -  benefited from GPS technology to locate richer deposits more efficiently.
• These high growth contributing sectors are also the important innovators, necessary for the ongoing competitive performance of firms in Australia.
• The authors identified a number of constraints to continued strong productivity growth including:
  • the need for further investment in IT and broadband infrastructure
  • labour force skills
  • an increasingly tight labour market
  • exhaustion of productivity catch up
  • limited export potential of the services sectors.
• 
  Understanding and analysing the drivers of productivity growth, and the potential constraints, are essential for both the performance of companies and their contribution to the economy, and the prosperity of the Australian community at large.  These are matters of vital importance to the current Australian government and community.

Your Comments