Figure 3.2 presents the labour input measure used to calculate the productivity measures in Figure 3.1. The most notable aspect is the difference in the response of the labour input index (total hours worked) to the two droughts. In 1994-95, there was a negligible change in total hours worked, which suggests that there was little labour shedding at the time. However, in 2002-03, total hours worked fell significantly. Moreover, unlike output, total hours worked did not recover in the period immediately after the 2002-03 drought. In fact, total hours worked continued to decline, albeit at a reduced rate. It appears this decline in total hours worked is largely responsible for the strength of the recovery in labour productivity and MFP in 2003-04 evident in Figure 3.1.
Perhaps the simplest explanation relates to the broader economic conditions of the time. In 2002-03, Australia's unemployment rate was significantly lower than in 1995-96. Workers in the agriculture sector may have been more easily able to find work in other sectors in 2002-03 - especially given the growing demand for similar types of labour in other industries such as Construction, Mining and Transport & storage. As a consequence, typically mobile agricultural workers may have been less inclined to accept any reduction in income from working in a temporarily depressed agricultural industry and, instead, have shifted to the booming construction and mining industries.
The decline in employment in 2002-03 occurred in all four employment types (figure 3.3). The biggest fall was in employees, which was against trend. The self employed farmers also declined faster in 2002-03, but it had been trending down for some time.
3.3 Agriculture, Forestry & Fishing Status in Employment