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Queensland Productivity on the rise: implications for the Sunshine State

The latest Australian Bureau of Statistics' measure of productivity growth reveals the sixth straight year in a row of productivity improvement in Australia (growing 0.6%) and the news is also good for Queensland.  Our State's productivity growth in the last two years has bounced back following a difficult period post GFC and it is now second only to NSW.

Productivity measures the efficiency with which combined labour and capital inputs are transformed into product or service outputs which is called ‘multifactor productivity’ (productivity).  Productivity as a concept has evolved from the simplistic GDP / total hours of work as non human inputs are also used to produce and provide output.

I really like to think of productivity as doing more with the same or the same with less. It is one of the most important indicators because from a society point of view productivity gains are the main source of real economic advancement and higher living standards.  Furthermore:

  • From a business point of view with rising input costs such as electricity productivity gains enable business to stay afloat and earn profits.
  • From an employee point of view productivity gains lead to greater likelihood of increased wages.
  • From an environmental point of view with a scarcity of resources productivity gains mean we are drawing less from the planet.

In dealing with the national data first, multifactor productivity grew 0.6% in 2016–17, marking six years of growth since 2011-12. This follows a period of productivity going backwards between 2004-05 to 2010-11.  Productivity growth in 2016-17 was a result of a 1.9% increase in output against a 1.3% increase in combined inputs. The input growth represents capital services growth of 1.9% and hours worked growth of 0.8%.

The 2016-17 result was however below the long term annual average of 0.9 per cent and included "significant variations across industry groups”. The largest productivity gains were experienced by Agriculture, forestry and fishing (+18.3%); Art and recreation services (+6.2%); and Wholesale trade (+4.0%). Tempering these gains were significant productivity declines in Construction (-7.3%); Manufacturing (-4.7%); and Other Services (-4.6%),.

An exceptionally good season for agricultural products in 2016-17 saw agriculture productivity rise 18.3 per cent, the fastest rate of growth since 2003-04. Growth in construction was weighed down by a contraction of heavy and civil engineering  due to reductions in new mining and heavy industrial projects. This is the fourth consecutive year that Construction saw a fall in MFP.

For the first time the ABS released experimental estimates of state and territory productivity, providing an indication over two decades of relative state productivity growth rates. Queensland productivity following the GFC had been in decline but very pleasingly in the past two years it has bounced back. Queensland productivity grew by 1.7% the second highest of all States and compares to the long term State average growth rate of 0.7%

This is fantastic news as it means our economy is transforming inputs into outputs more efficiently and is producing more goods and services from the same quantity of labour, capital, land, energy and other resources.  This improved production efficiency will inevitably generate higher real incomes and lead to long-term improvements in our economy’s living standards for all Queenslanders to hopefully benefit from. Finally it is almost guaranteed and perhaps understandable that we will see Unions use this data to push for higher wages in the months ahead.

 

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