Over the past two years, COVID-19 has had profound impact and has accelerated changes in the Australian economy. The industry level KLEMS multifactor productivity (MFP) dataset, containing detailed information on industry inputs’ cost shares and their contributions to output growth, can provide insights into changes to industry structures. This article highlights the potential industry analysis that can be done using the latest KLEMS MFP dataset, covering the period between 1995-96 to 2019-20. The next annual publication of the dataset is scheduled in November 2022 and contains the data for the reference period 2020-21.
Structural change refers to shifts in the way an economy, industry or market operates. It can play an integral role in facilitating a country’s economic growth and enhancing the living standards of its citizens. In recent decades, Australia experienced fundamental shifts in economic activity, from agriculture and goods-producing industries to services industries. In 2020-21, the services industries represented almost 80% of Australia’s gross domestic product. Shifts in structural composition can be triggered by government policies or market-related developments such as technological innovations and outsourcing trends. In either case, the process of structural adjustment has an impact on an industry’s input mix and productivity.
Structural changes can be assessed by examining compositional changes within an industry’s productive process. For example, the reallocation of resources to different inputs can raise aggregate productivity and result in economic growth. The analysis below examines the compositional changes in industry inputs over time for selected industries to better understand structural changes in the Australian economy and their impact on productivity.