5260.0.55.002 - Estimates of Industry Multifactor Productivity, 2018-19 Quality Declaration 
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Analysis of results

Market sector productivity, hours worked basis

On an hours worked basis, market sector multifactor productivity (MFP) fell 0.4% in 2018–19, the first decline since 2010–11. Market sector gross value added (GVA) grew 1.3%, the slowest output growth recorded for the market sector. By comparison, combined labour and capital inputs grew 1.6%, reflecting capital services growth of 1.8% and hours worked growth of 1.5%. Labour productivity fell 0.2% in 2018–19, the first recorded negative for the sixteen industry market sector aggregate (since the beginning of the time series in 1994–95).

On a quality adjusted hours worked basis, MFP fell 0.7% and labour productivity fell 0.8%. The weaker growth on this basis reflects a contribution from changes to labour composition, due to educational attainment and work experience.

Market sector, productivity growth: hours worked basis
Timeseries graph of multifactor productivity and labour productivity in the market sector


Key figures market sector productivity, 2018–19


Hours worked basis
Quality adjusted hours worked basis

% change
% change
Multifactor Productivity
–0.4
–0.7
Gross Value Added
1.3
1.3
Labour Input
1.5
2.1
Capital Input
1.8
1.8
Labour Productivity
–0.2
–0.8



Estimates of industry productivity

In 2018–19, MFP fell for eight out of the sixteen market sector industries. The largest falls in MFP were in Agriculture, Forestry and Fishing (– 9.8%), Construction (– 4.0%) and Professional, Scientific and Technical Services (– 3.2%). The largest MFP gain was in Mining (3.8%).

MFP growth in 2018–19, hours worked basis
Graph: multifactor productivity growth in the market sector industries in 2018-19


Agriculture, Forestry and Fishing records the largest MFP decline among market sector industries

Contributions to GVA growth (a) – Agriculture, Forestry and Fishing
Timeseries graph of the contributions to GVA growth in Agriculture, Forestry and Fishing
(a) Natural log growth x 100

MFP was down 9.8%in 2018–19, recording the industry's largest fall since 2006–07. The fall reflects:
    • GVA detracted 10.4%, mainly due to the drought affecting eastern Australia.
    • Combined inputs (capital and labour) contribution saw a 0.7% decline. The decline was driven by fall in hours worked (-0.4%) and a decline in capital services (-0.8%). The large fall in GVA, coupled with a minor reduction in hours worked, resulted in a fall in labour productivity (-10.1%).

Mining records the strongest MFP growth despite a decline in labour productivity

Contributions to GVA growth – Mining
Timeseries graph of the contributions to GVA growth in Mining

Mining MFP growth of 3.8% in 2018–19 was the sixth consecutive rise in MFP and the strongest result since 2014-15. Mining productivity growth was driven by:
    • Growth in GVA (6.1%), supported by continued strength in Oil and Gas Extraction.
    • Moderate contribution to growth (2.2 percentage points) in combined inputs was driven by subdued capital services growth (1.0 %) as Mining transitions from investment to production.
    • Hours worked grew 8.2% (the strongest growth since 2011–12), outpacing GVA growth, resulting in a decline in labour productivity (-2.0%).


The falling MFP trend continues for Construction

Contributions to GVA growth – Construction
Timeseries graph of the contributions to GVA growth in Construction

Construction MFP fell 4.0% in 2018–19, recording its fifth consecutive fall. This was driven by:
    • A decline in GVA of 3.4%, with weakness across all subdivisions.
    • Combined input growth of 0.5%. Capital services grew 3.6%, which was softer than the historical average but double the growth of the market sector’s capital services. Labour inputs fell 0.9%.

Professional, Scientific and Technical Services MFP declines as labour inputs outpace output growth

Contributions to GVA growth – Professional, Scientific and Technical Services
Timeseries graph of the contributions to GVA growth in Professional, Scientific and Technical Services

MFP fell 3.2% in 2018–19, following above average growth in the previous two years. The fall was driven by:
    • Moderate GVA growth (3.6%), driven by demand for advisory and consultancy services.
    • Combined inputs grew 7.0%, driven by growth in hours worked (7.4%). The large growth in inputs translated to a decline in the industry’s MFP and labour productivity.


Experimental state productivity estimates

There were mixed results across the states for MFP and labour productivity.
    • Positive MFP growth was recorded for Australian Capital Territory, Tasmania, Northern Territory, and Western Australia.
    • South Australia, New South Wales, Victoria and Queensland recorded falls in MFP .
    • Positive labour productivity growth was recorded for Australian Capital Territory, Northern Territory, Tasmania, Queensland and Victoria. The remainder of states recorded falls.

State MFP and labour productivity growth – 2018–19, percentage change (b)
Graph: multifactor and labour productivity growth in the states in 2018-19
    (b) natural log growth x 100


New South Wales MFP fell in 2018–19

Contributions to GVA growth
Timeseries graph of the contributions to GVA growth in New South Wales
    • In 2018–19, MFP in New South Wales fell 0.9%, as inputs outpaced output growth.
    • Hours worked contributed 1.4 percentage points, while capital services contributed 0.8 percentage points to market sector GVA growth.
    • The negative 2018–19 result followed positive MFP growth, averaging 1.3% per year over the period 2008–09 to 2017–18.


Victoria records negative MFP in 2018–19

Contributions to GVA growth
Timeseries graph of the contributions to GVA growth in Victoria
    • MFP in Victoria declined 0.3% in 2018–19.
    • Market sector GVA growth softened to 1.9% in 2018-19, following a 3.4% rise in 2017–18. Construction was the main driver of market sector GVA growth in 2018–19.
    • Capital services contributed 1.3 percentage points to GVA growth, while hours worked contributed 1.0 percentage points.
    • The negative 2018–19 result was on the back of MFP growth averaging 1.3% per year between 2013–14 and 2016–17, before flattening in 2017–18.


Queensland MFP growth records a slight detraction in 2018–19

Contributions to GVA growth
Timeseries graph of the contributions to GVA growth in Queensland
    • Queensland MFP growth fell 0.1% in 2018–19.
    • Market sector GVA growth slowed to 0.3%, following growth of 3.7% in the previous year. The slower growth in 2018–19 reflects a significant fall in Construction GVA associated with lower private business investment activity. Capital services contributed 0.8 percentage points to GVA growth which was partly offset by a negative contribution from hours worked.
    • Queensland recorded positive MFP growth between 2015–16 and 2017–18, averaging 1.7% per year.


South Australia records a large fall in MFP

Contributions to GVA growth
Timeseries graph of the contributions to GVA growth in South Australia
    • In 2018–19, MFP in South Australia fell (1.9%), the strongest recorded decline since 2006–07.
    • Inputs remained steady with capital services and hours worked contributing 0.5 percentage points and 1.2 percentage points respectively to GVA growth.
    • Market sector GVA fell 0.2% in 2018–19 following strong growth in 2017–18.


Western Australia MFP growth slowed in 2018–19

Contributions to GVA growth
Timeseries graph of the contributions to GVA growth in Western Australia
    • In 2018–19, MFP growth slowed to 0.4% in Western Australia.
    • Market sector GVA grew 1.7% in 2018–19, mainly driven by Mining.
    • Capital services contributed 0.5 percentage points to GVA growth in 2018-19. Capital services growth has slowed significantly since 2013–14 as a result of slowing new investment in Mining.

Tasmania continues to record strong MFP growth in 2018–19

Contributions to GVA growth
Timeseries graph of the contributions to GVA growth in Tasmania
    • Tasmania’s MFP grew significantly (3.9%) in 2018–19, recording two consecutive years of above average growth.
    • Market sector GVA grew 2.9% in 2018–19, following a 4.2% growth the previous year. The other main contributor to market sector GVA growth was capital services (0.7 percentage points), while hours worked detracted from output growth.
    • Capital services contribution was stronger over the period 2001–02 to 2011–12, averaging 1.7 percentage points.


Northern Territory MFP grew in 2018–19

Contributions to GVA growth
Timeseries graph of the contributions to GVA growth in the Northern Territory
    • MFP grew 1.9% in 2018-19, the second consecutive annual growth.
    • Market sector GVA in 2018–19 recorded negative growth for the first time since 2009–10.
    • The growth in MFP in 2018-19 was driven by the substantial fall in labour inputs, with hours worked detracting 3.7 percentage points from market sector GVA.
    • Capital services contribution (0.7 percentage points) to GVA growth remained positive in 2018–19, the lowest contribution since 1995-96.


Australian Capital Territory recorded the strongest MFP growth in 2018–19

Contributions to GVA growth
Timeseries graph of the contributions to GVA growth in the Australian Capital Territory
    • Australian Capital Territory recorded the fourth consecutive rise in MFP, with 2018-19 the strongest result at 5.2%.
    • GVA grew 2.8% in 2018–19, driven by business consulting and computer services supporting the Australian Public Service.
    • Capital services growth has slowed in recent years to contribute 0.5 percentage points to market sector GVA growth in 2018–19. This follows an average growth of 2.6 percentage points contribution between 1998–99 and 2009–10.
    • Hours worked detracted 2.9 percentage points in 2018-19, after four years of positive contribution.

For more information on experimental estimates of state and territory productivity (Tables 27 to 42), see Feature Article: Experimental Estimates of State Productivity.


Productivity growth cycles

Growth cycle analysis can minimise the effects of some temporary influences (such as variation in capital utilisation) by averaging productivity measures over a cycle. For more information about the productivity growth cycle, please see the Feature Article: Experimental Estimates of Industry Value Added Growth Cycles in 2015–16 issue of Estimates of Industry Multifactor Productivity (cat. no. 5260.0.55.002).

A new growth cycle for the market sector was identified for 2011–12 to 2017–18. MFP contributed an average of 0.8 percentage points to GVA growth per year for this growth cycle, up from the previous cycle (2003–04 to 2011–12), which was flat. Relative to earlier growth cycles, GVA growth was more subdued, averaging 2.6%. Capital services contributed 1.2 percentage points to GVA growth in the latest cycle, compared to 2.2 percentage points in the previous cycle.

Contribution to output growth, by growth cycle, average percentage points

Growth cycles
1998–99 to 2003–04
2003–04 to 2011–12
2011–12 to 2017–18

Output (GVA) growth (c)
3.6
3.1
2.6
Contribution to output growth (hours worked basis)
Capital services
1.7
2.2
1.2
Hours worked
0.7
0.9
0.5
Multifactor productivity
1.2
0.0
0.8

(c) Natural log growth x 100


Revisions

This publication incorporates revisions implemented in 2018–19 as follows: