PRODUCTIVITY
The 1990s saw strong value added based multifactor productivity (MFP) growth in the Wholesale trade industry relative to the market sector. This was due not only to strong growth in outputs, but also to slower growth in inputs. Over the 1990s the Wholesale industry had one of the fastest growth rates in MFP, but since 2000-01 MFP growth has slowed. Between 1985-86 and 2005-06 MFP grew at 1.5% per year. This was faster than the market sector as a whole, which grew at 1.2% per year.
Figure 8.1 shows MFP, labour productivity and capital productivity for the Wholesale industry. The figure shows that MFP and labour productivity follow a similar pattern, with little growth in MFP and labour productivity over the second half of the 1980s and the early 1990s. From 1993-94 growth in MFP increased and this growth rate began slowing in 1997-98. There was no growth in MFP over the last year.
8.1 Wholesale MFP, labour productivity and capital productivity, (2004-05 = 100)
Figure 8.1 also includes gross output based MFP growth. The chart shows that gross output based MFP is growing more slowly than value added MFP, which is to be expected. The measures of value added and gross output have grown at similar rates over the last ten years (figure 8.2). However, the slower rate of growth in the gross output based measure of MFP is due to the inclusion of intermediate inputs in the equation. Intermediate inputs have a strong influence on gross output based MFP growth because they account for on average around 57% of the combined inputs. Intermediate inputs grew at approximately the same rate as gross output over the period 1994-95 to 2004-05. This means that the combined inputs index, which includes labour, capital and intermediate inputs grew twice as fast as the combined labour capital index (figure 8.3).
Capital productivity has followed a different pattern to MFP and labour productivity. The capital productivity series shows a decline between 1985-86 and 2005-06. However, there was a short increase in growth in capital productivity between 1993-94 and 1997-98. Growth in capital services slowed relative to growth in output over this period.
The increase in MFP over the 1990s came from increases in output without any commensurate increases in inputs, especially labour. Figure 8.2 shows the output and input components used in measuring MFP. While there was slower growth in capital services over the 1990s it was the hours worked that influenced the combined inputs index. This was because the labour income share is approximately 65 per cent of total factor income.
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