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1360.0 - Measuring Australia's Economy, 2003  
Latest ISSUE Released at 11:30 AM (CANBERRA TIME) 03/02/2003   
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The average annual growth rate between the latest two 'growth cycle' peaks (see explanatory notes below) in 1993-94 and 1998-99 was 1.8% for multifactor productivity, 3.2% for labour productivity and -0.1% for capital productivity. The growth rate for multifactor productivity over the latest cycle is higher than for any preceding cycle since multifactor productivity was first measured in respect of 1964-65.




PRODUCTIVITY INDEXES, Market Sector (2000-01 = 100.0)

Labour (a)
Capital (b)
Multifactor (c)

1992-93
82.4
103.6
90.5
1993-94
84.6
105.3
92.5
1994-95
85.0
106.3
93.1
1995-96
88.4
107.3
95.7
1996-97
91.3
105.7
96.9
1997-98
95.2
105.0
99.1
1998-99
98.9
104.7
101.3
1999-00
99.6
103.2
101.1
2000-01
100.0
100.0
100.0
2001-02
104.4
100.6
102.8

(a) Gross domestic product per hour worked.
(b) Gross domestic product per unit of capital services.
(c ) Gross domestic product per combined unit of labour and capital.

Source: Australian System of National Accounts (5204.0).



Explanatory Notes

Productivity is the relationship between economic output and the inputs, such as labour and capital, which have gone into producing that output. Productivity can be increased through better utilisation of resources.

Multifactor productivity (MFP) is a measure of the efficiency of the production process that takes account of more than one input (factor). It is expressed as a ratio of output to a combined measure of two or more factor inputs (e.g. capital and labour). MFP measures are typically presented in index number form.

The ABS measures MFP as the ratio of chain volume estimates of market sector GDP to a combined measure of capital services and hours worked. Growth in MFP can arise from technical progress, improvements in the work force, improvement in management practices, economies of scale and so on.

Productivity indexes fluctuate according to the business cycle. One way to measure the trend rate of growth of productivity is to calculate the average annual growth rate between growth cycle peaks. Growth cycle peaks for multifactor productivity are identified as local maximum positive deviations of the productivity index from its long-term trend.

Labour productivity is usually measured as the amount produced per hour worked. Quite clearly, this measure can be affected by technological changes and changes in other inputs (e.g. capital), as well as changes in labour efficiency.

Capital productivity is measured as the amount produced per unit of capital services employed. Equipment, structures, land and inventories are forms of capital goods used in the production of goods and services.

Productivity measures are used by both government and private organisations to gauge the effect of changes in work practices, technology, education and training.


Further Reading

Australian System of National Accounts (5204.0)
Contains the multifactor productivity index for the market sector. It also includes associated labour productivity, capital productivity and capital-labour ratio indexes.

Australian National Accounts: Concepts, Sources and Methods (5216.0)
Contains a detailed explanation of the system of Australian national accounts outlining major concepts and definitions.

Occasional Paper: Estimates of Multifactor Productivity, Australia (5233.0)
Describes the ABS MFP indexes, including their limitations. Alternative measures of MFP are described briefly. The methods used to derive estimates of MFP have been upgraded since the occasional paper was released, and so reference should be made to 5216.0 for up-to-date methodological information.

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