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The slowdown in the growth in capital services in 1999-00 was due to a significant fall in investment (GFCF) in that year. However, it has since rebounded, although in volume terms this rebound seems to have returned the series to the trend growth rate that occurred over the 1990s (see figure 4.2). The volume of investment jumped significantly in 2005-06, especially in non-dwelling construction (figure 4.5).
In the last few years the two assets with the fastest growth in GFCF, non-dwelling construction and industrial machinery, also increased their contribution to capital services, which is a product of the rental price weights in figure 4.6 and the growth in the productive capital stock in figure 4.7.
The changes in the industry composition discussed above may also indicate that the capital-labour mix required has changed. Figure 4.8 shows a move from more capital intensive (oil and gas) to more labour intensive activities. Despite the changes to the capital-labour ratio, Mining remains a very capital intensive industry, and has one of the highest levels of capital to labour of any Australian industry at $1.35 million of net capital stock per person employed in 2005-06. This is also reflected in the fact that capital's share of income is on average 70%, although in recent years this has risen to 80%.
There are a number of issues to consider when examining how the changes in capital impact on the MFP estimates. For instance, while investment has been increasing in recent years it may be that there is a lag preceding the use of the asset in production. This may be another reason that might explain the slowdown in productivity. Another possible issue with capital services measurement is that the fall in oil production is not mirrored by a fall in the associated capital services. That is, the current capital services measure assumes that oil rigs are operating at a constant level of capacity even though this level of capacity utilisation may be falling, given declining oil and gas volumes. See the appendix at the end of this chapter for more details.