Productivity in the construction industry

by David Richardson

Construction is an important industry in Australia, with sales accounting for $327 billion or

some 21 per cent of GDP and its contribution to value added being 7.6 per cent of GDP.

Australian Bureau of Statistics (ABS) data allow us to examine and estimate the productivity

magnitudes involved in this industry and its components; building construction, heavy and

civil engineering construction and construction services. These components account for 35,

23 and 43 per cent of the industry respectively.

The word productivity is often used loosely in ordinary language – here we use it strictly as a

quantitative relationship between industry output and the labour and capital inputs. As a

measure of output, we use the ‘value added’ created by the industry. In the case of labour

inputs, the best measure is hours worked – however, for some purposes we are forced to

use simple head counts. Productivity of Australian labour is critically important, being one of

the drivers of living standards in the long run.

Generally we find that construction is a productive industry with a value added per worker

above the average of all industries and well above the average, if extremely productive

industries such as mining are excluded. Some parts of construction such as heavy and civil

engineering are very productive, generating productivity 53 per cent higher than the Australian average.

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