“Australia experienced a large decrease in labour productivity for the whole economy (-2.0%) and the market sector (-1.7%) in the June 2023 quarter, resulting in an expected 3.2% fall in annual productivity from 2021-22 to 2022-23. This is largely because hours worked increased more than output.” [PC productivity insights: Quarterly productivity bulletin — September 2023]
There’s been a decrease in labour productivity reported in the Productivity Commission’s Bulletin of September Quarter 2023, but the villains of the piece are not workers per se.
The June quarter covering 1 April to 30 June 2023 saw a convergence of factors influencing productivity which were outside the influence of the Australian workforce.
Generally, a tighter labour market reaching an historically high employment level in that quarter meant that more hours were being worked. However hiring practices do not necessarily mean businesses were taking on highly skilled labour or that there was always a large pool of highly skilled workers available to particular businesses - which when combined with a weakening retail demand for certain goods due to high cost of living pressures continuing to limit household purchasing choices - meant that productivity slowed.
At industry level the Productivity Commission made no mention of wages or days lost to industrial action as being factors in June Quarter 2023 productivity decline.
Adverse weather combined with planned maintenance were the principal reasons leading to a decrease in iron ore mining and oil and gas extraction which saw that sector report 15.3% of the overall Australian productivity decline.
The mining industry reportedly began to stagnant during the first two years of the COVID-19 pandemic and 2021-2022 & 2022-2023 saw heavy rain and floods disrupted mining operations as well as the transportation network for coal movement and mining workers.
Productivity declines in electricity, gas, water and waste water services sector, combined with declines in the information, media and telecommunications sector, accounted for another 30.6% of the total productivity loss recorded in the June quarter.
Electricity, gas, water and waste water services sector apparently continuing an average negative annual productivity growth established in 2020-21 and, Information, media and telecommunications seemingly heading towards falling short of the productivity level recorded in 2021-22.
One has to suspect one of these three sectors – electricity, gas, water & waste water services – may be suffering less from environmental factors and more from boardrooms in that sector displaying both an overattachment to legacy infrastructure and a lack of appetite for genuine innovation.
Australian Government Productivity Commission, Quarterly Production Bulletin – September 2023, released 10:30pm AEST, 10 October 2023:
Productivity decreased by 2% in the June 2023 quarter, as record-high growth in hours worked outpaced output growth, according to the Productivity Commission’s latest Productivity Bulletin.
“Our unemployment rate remains low. Australians worked more in the June quarter as cost-of-living pressures continue to bite. But even though hours worked rose, the rise in output was more modest, and that shows up as a reduction in labour productivity,” Acting Chair Alex Robson said.
The report finds that while output was up 0.4%, hours worked for the whole economy and the market sector increased by 2.4% and 2.2% respectively – the largest quarterly increase on record outside the COVID-19 pandemic.
“Productivity growth is about working smarter, not working longer or working harder. Negative productive growth means that on average, Australians worked more hours just to produce and buy the same amount of goods and services. In other words, Australians have been running to stand still.”
The report suggests that while demand for labour may taper off as interest rates rise and the economy slows, we can’t rely on short term fluctuations in hours worked as a source of long-term productivity growth.
“Our productivity challenge has been urgent for many years. We will only see sustainable, long-term productivity growth if we increase investment and innovation,” Dr Robson said.
The research finds that 15 out of 19 industries experienced a decline in labour productivity over the 2023 June quarter.
The arts and recreation services industry saw the largest decline in productivity (-7.6%), as hours worked increased by 9.3% while output rose only 0.9%.
However, three industries drove about 46% of the overall labour productivity decline: mining; electricity, gas, water and waste services; and information, media and telecommunications.
The mining industry alone made up around one-third of the total labour productivity decline, as hours worked increased while output significantly declined. The decline in mining output was mainly driven by a decrease in iron ore mining and oil and gas extraction, as adverse weather and planned maintenance reduced production capacity.
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