The recent debate about productivity trends in Australia has revolved around the reported decline in labour productivity growth. For example, the new Secretary of the Treasury, Dr Martin Parkinson recently stated: “Australia’s productivity growth, measured in terms of both labour productivity and multifactor productivity, has slowed, and there is little reason to believe it will improve in the immediate term.”
Similarly, the latest Reserve Bank of Australia (RBA) Board minutes stated”‘Australia’s productivity growth over the past five to ten years had been weak”.
The national decline in the trend rate of productivity growth has in turn been used to justify the need for further labour market reform, for workers to lower their expectations about future wage rises and for further microeconomic reforms. The problem is, however, that a detailed examination of the national productivity figures makes it clear that the productivity of Australian workers is actually rising quite rapidly. In fact, the apparent decline in labour productivity vanishes once the data is adjusted for the very large reductions in productivity in the small, but rapidly growing, mining sector.