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Multifactor productivity (MFP) statistics provide a measure of changes in the efficiency of production. These measures are used by both government and private organisations to help gauge the effect of changes in work practices, technology, education and training.
MFP statistics are available only for the market sector as a whole. Although MFP is the more comprehensive measure of productivity, the ABS also produces industry labour productivity indexes. One measure of labour productivity, an index of industry GVA in chain volume measures per hour worked, is useful because it is available for each market sector industry.
Labour productivity is constant if there is no change in the amount produced (chain volume GVA) per hour worked. Changes in this ratio reflect changes in the average skill or productivity level of the workforce. This measure reflects not only the contribution of labour to changes in production but also the contribution of capital and other factors (e.g. technological changes and managerial efficiency).
Movements in employment and hours worked tend to lag movements in GDP. The implication being, in the period of the growth cycle when the growth in output is declining, indexes of labour productivity are also likely to decline, particularly if rapid growth in GDP is abruptly ended. Conversely, labour productivity indexes are likely to grow strongly when the economy comes out of a cyclical trough.
Graph 13.8 shows the average annual rate of growth in the amount produced per hour worked for market sector industries over the most recent business growth cycle (1993-94 to 1998-99). Over this period, the average annual growth rate was 3.4% for the market sector as a whole.
Most of the market sector industries increased their productivity per hour worked. Between 1993-94 and 1998-99, the industries with the highest average annual productivity growth rates were communication services (7.4%), electricity, gas and water supply (7.2%), wholesale trade (6.8%) and mining (5.2%). Negative growth was seen only in the cultural and recreational services industry. On average, this industry's productivity fell by 0.7% per year between 1993-94 and 1998-99.
In the previous business growth cycle (1988-89 to 1993-94), market sector productivity per hour worked grew, on average, by 2.3% each year. The communication services industry and the electricity, gas and water supply industry were again the top two productive industries in terms of growth in amount produced per hour worked. The mining industry was the third most productive industry (rising on average by 5.3% each year). In this cycle, negative growth in amount produced per hour worked was seen in the accommodation, cafes and restaurants (-1.6%), wholesale trade (-1.4%) and cultural and recreation services (-0.4%) industries.
The largest increase in productivity between the two business cycles (1988-89 to 1993-94 and 1993-94 to 1998-99) was in the wholesale trade industry. This industry's average annual productivity was 8.2 percentage points greater in the most recent cycle compared with the previous cycle.