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Economics update | 14 July 2023
14 Jul 2023
Historically low labour productivity
The Productivity Commission this week reported a 4.6 per cent decline in labour productivity for the 12 months to March 2023. This decline is partly structural due to unwinding of COVID-19 restrictions. Service sectors were most affected by the restrictions; with less productive workers in these sectors more likely to experience unemployment, there was a temporary increase in labour productivity in 2021-22. However, this reallocation effect was reversed as the economy reopened in 2022-23. The labour market quickly recovered from the COVID-19 pandemic and unemployment fell to new lows. When lower-productivity workers re-entered the workforce, labour productivity sharply declined in 2022-23.
Labour productivity and multifactor productivity increased by 1.5 per cent and 2.2 per cent respectively in 2021-22. The agricultural, forestry and fishing sector recorded a productivity boom of around 13.7 per cent. This boom however was driven by weather conditions rather than technology or efficiency. The mining sector recorded the largest decline in labour productivity, around 5 per cent. However, a strong growth in commodity prices led to an increase in the mining investment which is anticipated to reverse the weak real output and productivity growth in the mining sector.
The full Productivity Commission report examines the productivity trends across sectors and notes that investment in innovation and upskilling the workforce is required for improvement in labour productivity.
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