Estimates of Industry Level KLEMS Multifactor Productivity

Latest release

Presents estimates of industry level KLEMS Multifactor Productivity (MFP) for the 16 industries that comprise the market sector

Reference period
2020-21 financial year

About this release

KLEMS provides a detailed statistical decomposition on the contributions to output growth, represented by five input categories - capital (K), labour (L), energy (E), materials (M), and services (S). This allows for analysis on the changes to the input mix, such as the role of labour hours and composition of relative capital services or intermediate inputs, observed in industry output growth.

The 2020-21 financial year marked the first full year of the economy impacted by Covid-19. The following key things happened in the Australian economy in 2020-21:

  • The Australian economy rebounded, growing 2.2% in real terms, following a contraction in 2019-20.
  • Restrictions, including border closures and lockdowns, continued into 2020-21 to contain the spread of Covid-19. This had a marked impact on production capacity for businesses across industries and limited migrant labour supply into Australia.
  • Easing drought conditions and more favourable weather assisted output growth in several industries, including Agriculture, forestry and fishing, Retail trade and Wholesale trade.
  • The recovery of economic activity pushed hours worked beyond its pre-pandemic (2018-19) levels in several industries, including Professional, scientific and technical services and Financial and insurance services. However, hours worked was yet to recover fully in industries such as Accommodation and food services and Agriculture, forestry and fishing due to pandemic-related restrictions.

Analysis of results

In 2020-21, KLEMS MFP grew, on quality adjusted hours worked basis, in nine of the sixteen market sector industries.

(a) The reported percentage changes are based on natural log growth x 100.

  • Agriculture, forestry and fishing saw the strongest rise in KLEMS MFP (8.5%) across the sixteen market sector industries, reversing the falls in MFP in the previous three years. Gross output rose 15.6%, the largest output rise on record for the division since 2003-04. The strength in output was driven by increased production of grain crops which benefitted from increased rainfall and high global grain prices. The growth in output was supported by the increased use of intermediate inputs which contributed 7.5 percentage points (ppts) to output growth. Use of services and materials in particular rose, contributing 4.5 ppts and 2.7 ppts to output growth respectively. In 2020-21, the labour market was impacted by international border closures restricting the inflow of migrant workers. As a result, hours worked detracted 0.3 ppts from gross output growth.
  • Accommodation and food services posted a strong KLEMS MFP result, rising 3.0% following a 1.9% contraction in the previous year. This was the strongest growth in KLEMS MFP experienced in this industry since 1995-96. Gross output grew 1.5%, benefitting from the strong rise in productivity. The result reflected the recovery of economic activity as lockdowns eased and demand for food and beverage services rose. Softening the strength in gross output was hours worked which detracted 1.0 ppt from output growth. This was due to the combination of a constrained supply of workers due to border closures and the impact of pandemic-related restrictions in some states. Contraction in intermediate inputs detracted a further 0.6 ppts from output growth, with materials (detracting 0.8 ppts) driving down the otherwise positive result.
  • The largest fall in KLEMS MFP was in Transport, postal and warehousing (3.2%). This fall contributed to the largest gross output contraction (6.8%) on record for the industry since 1995-96. Travel restrictions at both national and state levels along with border closures, resulted in a fall in domestic and international air passenger volumes, negatively impacting industry output. Intermediate inputs detracted 2.6 ppts from output growth, with energy and services weakening output by 1.6 ppts and 1.1 ppts respectively.
  • Mining recorded a large fall (2.5%) in KLEMS MFP, marking the first fall in productivity for this industry since 2012-13. Gross output also experienced a fall (3.2%), the strongest fall since 1998-99. The fall in output was driven by strong declines in production volumes for Coal mining and Oil and gas extraction owing to adverse weather conditions, technical issues, and operational incidents. The use of energy, materials, and services fell in line with the drop in production volumes, detracting 1.4 ppts from gross output growth. Partly offsetting the fall in output was strength in Iron ore mining driven by record-high iron ore prices. Despite weakness in intermediate input use, labour and capital services still rose, contributing 0.3 ppts and 0.5 ppts to output growth respectively.
     

Contributions to gross output growth, by market sector industries, 2020-21, percentage points (a)

 
Industry     Gross Output GrowthCapital ServicesLabour Services (b)EnergyMaterialsServicesKLEMS MFP (c)
Agriculture, forestry
and fishing
15.6-0.1-0.30.32.74.58.5
Mining      -3.20.50.3-0.2-0.1-1.1-2.5
Manufacturing-0.60.00.0-0.4-0.2-0.60.6
Electricity, gas, water
and waste services
0.60.60.4-0.2-0.40.6-0.4
Construction1.00.2-0.20.00.60.4-0.1
Wholesale trade3.80.61.1-0.30.11.40.8
Retail trade6.40.81.6-0.10.72.80.6
Accommodation and 
food services
1.50.0-1.00.0-0.80.23.0
Transport, postal and
warehousing
-6.80.4-1.4-1.60.1-1.1-3.2
Information, media and
telecommunications
1.20.51.30.00.2-0.3-0.3
Financial and insurance
services
2.6-0.11.30.00.00.41.0
Rental, hiring and real
estate services
2.20.50.2-0.20.00.90.8
Professional, scientific
and technical services
2.40.50.80.00.00.60.5
Administrative and
support services
-3.20.1-4.50.0-0.1-1.42.7
Arts and recreation
services
-2.80.3-0.90.0-0.3-1.7-0.2
Other services0.50.7-0.90.01.30.4-1.0

a. The reported percentage changes are based on natural log growth x 100.
b. Quality adjusted hours worked basis.
c. Gross output-based MFP, quality adjusted hours worked basis.

Industry cost shares

Contributions to output growth are calculated by multiplying the growth in inputs by their respective cost share. Two period average cost shares for each industry are reported in the table below.

Two period average cost shares, by market sector industries, percentage, 2020-21 (a) (b)

 
IndustryCapital Services - ITCapital Services - Non-ITLabour Services (c)EnergyMaterialServices
Agriculture, forestry and fishing0.127.311.63.921.136.0
Mining      0.252.69.44.25.428.1
Manufacturing0.49.517.85.447.819.1
Electricity, gas, water and waste services1.123.213.16.14.851.7
Construction0.510.319.51.122.246.4
Wholesale trade1.318.631.92.15.440.7
Retail trade1.517.339.31.66.933.3
Accommodation and food services0.410.835.62.627.323.3
Transport, postal and warehousing0.616.427.17.12.945.9
Information, media and telecommunications3.519.518.31.75.151.9
Financial and insurance services5.934.120.10.50.538.9
Rental, hiring and real estate services1.228.219.91.80.947.9
Professional, scientific and technical services2.06.443.40.61.446.2
Administrative and support services1.43.958.10.31.634.7
Arts and recreation services1.011.026.90.617.043.5
Other services1.08.039.30.625.725.4

a. Two periods represent t and t-1.
b. Percentages may not add up to 100% due to rounding.
c. Combined hours worked and labour composition.

Industry cost structures are very diverse, varying from industry to industry and over time. In 2020-21, the largest cost shares were observed in the following industries:

  • Mining is a typically capital-intensive industry, with non-IT capital services representing over half (52.6%) of the industry's total input costs.
  • Administrative and support services is a labour-intensive industry, with labour services accounting for more than half (58.1%) of the industry's total input costs.
  • Manufacturing is reliant on materials for production, with materials representing nearly half of total input costs.
  • Information, media and telecommunications has the highest services cost share of all market sector industries, indicating strong outsourcing activity.

Industries may also undergo structural change over time, such as, responding to changes in the relative prices of inputs, which can cause an industry's cost shares to vary. For more information on the dynamic nature of industry cost shares, see Structural change in Australian industries – insights from the KLEMS Multifactor Productivity 2019-20 dataset.

Revisions in this issue

This publication incorporates revisions as follows:

Data download

Tables 1 to 16: Estimates of industry level KLEMS Multifactor Productivity

Previous catalogue number

This release previously used catalogue number 5260.0.55.004.

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