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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