1301.0 - Year Book Australia, 2012  
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Industry structure and performance


Multifactor productivity (MFP) statistics provide a measure of changes in technical progress or efficiency in the economy over time. The measures are used by both government and private organisations to help gauge the sources of economic growth not explained by changes in the measured inputs.

MFP statistics use industry GVA (in volume terms) as the measure of output. Two inputs are used – labour (hours worked) and capital. Capital inputs are a flow measure based on the productive capacity of capital. This means that MFP largely represents the effects of technical progress, improvements in the work force, improvements in management practices and economies of scale. MFP can also be affected in the short to medium term by other factors such as the weather and by variations in capacity utilisation.

Due to the slowdown and decline in the growth of aggregate MFP since 2004–05, there has been an increased focus on the industry origins of aggregate MFP measures. To assist analysts to go beneath the aggregates, MFP measures are also published for each of the individual industries within the market sector grouping. These are industries with marketed activities for which there are satisfactory estimates of the growth in the volume of output. Excluded from this grouping are Public administration and safety, Education and training, Health care and social assistance and Ownership of dwellings.

Care needs to be taken interpreting industry level MFP results because they are more sensitive than aggregate measures to externalities such as weather, variations in capacity utilisation and measurement error, particularly the year-to-year results. When MFP is considered over long-term trends, it is useful in assessing underlying productive capacity, sometimes referred to as potential output. This is also an important measure of the growth possibilities of the industry and the economy.

Compound average annual growth results are presented for the period 2000–01 to 2010–11 in Table 15.10. To illustrate key industry contributors to the recent MFP slowdown, this is split into two equal periods as follows:

  • In the first period, 2000–01 to 2005–06, MFP for the market sector grew on average by 0.7% per annum. Industries recording the strongest growth in this period were Construction (4.2%); Agriculture, forestry and fishing (3.2%); and Financial and insurance services (2.9%). While MFP growth was strong for these industries, there were significant offsets from MFP declines in Mining (–4.1%); Electricity, gas, water and waste services (–3.5%); and Rental, hiring and real estate services (–3.0%).
  • In the second period, 2005–06 to 2010–11, MFP for the market sector fell on average by 0.7% per annum. Again, significant declines were recorded for Mining (–6.2%); Rental, hiring and real estate services (–5.1%); and Electricity, gas, water and waste services (–4.7%). Growth had also weakened in the Construction and Agriculture, forestry and fishing industries.


ANZSIC Division(a)
2000–01 to 2005–06
2005–06 to 2010–11
2000–01 to 2010–11

Agriculture, forestry and fishing
Electricity, gas, water and waste services
Wholesale trade
Retail trade
Accommodation and food services
Transport, postal and warehousing
Information media and telecommunications
Financial and insurance services
Rental, hiring and real estate services
Professional, scientific and technical services
Administrative and support services
Arts and recreation services
Other services
Market sector

(a) Classified according to the Australian and New Zealand Standard Industrial Classification (ANZSIC), 2006 (1292.0).
Source: Experimental Estimates of Industry Multifactor Productivity (5260.0.55.002); Australian System of National Accounts (5204.0).

The MFP declines for the Mining and Electricity, gas, water and waste services industries has attracted the attention of analysts and has subsequently become the focus of further research. The ABS has found that MFP in these industries is more difficult to measure because of a range of factors. For the Mining industry, the three key measurement issues identified are:
  • the deteriorating quality of natural resource inputs
  • lengthy time lags between the commencement of mining capital projects and formation of productive capacity, and
  • the entrance of less experienced workers.

Similarly, lengthy time lags in capital projects have also been observed in Electricity, gas, water and waste services. Recent examples include the construction of desalination plants and improvements to dam capacity. This industry is also affected by fluctuations in the availability of water due to changes in the climate. As with natural resource inputs for Mining, this influence in not recorded in the inputs mix. However, in both industries, natural resources directly influence production and therefore the gross value added measures.

Productivity puzzles also extend to the services industries. International experience demonstrates that there are additional conceptual and data issues surrounding productivity measurement for services industries as they lend themselves to a range of additional measurement complexities. In particular, it is more difficult to estimate quality adjusted output volume measures due to the intangible characteristics of many kinds of services. Examples include the provision of training and consultancy services.

The ABS also produces industry labour productivity indexes. Rather than attempt to measure efficiency, labour productivity is intended as an indicator of the standard of living. In this sense, measuring labour productivity helps to better understand the development of living standards.

Labour productivity is defined as real gross value added per hour worked. Graph 15.11 shows the average annual compound rate of growth in labour productivity for market sector industries over the period 2000–01 to 2010–11. Over this period, the average compound annual growth rate of labour productivity for all industries was 1.2%.

Most industries increased their labour productivity over the period 2000–01 to 2010–11. The industries with the highest average annual compound growth rates in labour productivity were Agriculture, forestry and fishing (5.3%); Information media and telecommunications (4.6%); and Financial and insurance services (3.7%). The highest average annual negative compound growth was seen in Mining (–6.5%) and Electricity, gas, water and waste services (–4.8%).

15.11 GROSS VALUE ADDED PER HOUR WORKED(a), Market sector industries - 2000-01 to 2010-11


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Statistics contained in the Year Book are the most recent available at the time of preparation. In many cases, the ABS website and the websites of other organisations provide access to more recent data. Each Year Book table or graph and the bibliography at the end of each chapter provides hyperlinks to the most up to date data release where available.