Estimates of Industry Multifactor Productivity

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Updates estimates of multifactor productivity (MFP) for industries and market sector aggregates.

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Reference period
2019-20 financial year
Released
30/11/2020
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Release date and time
30/11/2020 11:30am AEDT

Analysis of results

On an hours worked basis, market sector multifactor productivity (MFP) fell 0.7% in 2019-20. Market sector gross value added (GVA) declined 1.2%, the first decline recorded for the market sector since the series commenced in 1994-95. By comparison, combined labour and capital inputs declined 0.5%, reflecting capital services growth of 1.0% and hours worked fall of 1.7%. Labour productivity grew 0.6% in 2019-20, resulting from a greater fall in hours worked than GVA. 

On a quality adjusted labour input (QALI) basis, MFP fell 1.0% and labour productivity fell 0.1%. The weaker growth on this basis reflects a positive contribution from changes to labour composition, due to educational attainment and work experience.

Key figures market sector productivity, 2019-20
 Hours worked basisQuality adjusted hours worked basis
 % change% change
Multifactor Productivity-0.7-1.0
Gross Value Added-1.2-1.2
Labour Input-1.7-1.1
Capital Input1.01.0
Labour Productivity0.6-0.1

 

Changes to hours worked

Historically, labour input for productivity compilation has been sourced from the hours worked series of the Labour Force Survey (LFS). For the 2019-20 reference year, the national accounts moved to hours worked movement from the Australian Labour Account for industries and the market sector aggregates. This more accurately captured the fall in hours worked due to COVID-19 related restrictions which occurred after the LFS reference period (for further information see Assessing the impact of COVID-19 on the Labour Account). The change will affect the hours worked series for the current year.

Estimates of industry productivity

In 2019-20, weakness in MFP was broad-based with ten out of 16 market sector industries recording a fall in MFP. The largest falls in MFP were in Agriculture, forestry and fishing (8.3%), and Administrative and support services (7.8%). The largest MFP gains were in Mining (3.7%) and Retail trade (3.6%).

Agriculture, forestry and fishing records the third consecutive fall in MFP

MFP fell 8.3% in 2019-20, recording its third consecutive fall. The fall was driven by:

  • A large fall in GVA (8.0%) reflects declines in grain crop and other agricultural production due to ongoing drought conditions. 
  • Combined inputs grew 0.4%, reflecting a 2.8% rise in hours worked and a 0.7% decline in capital services. The fall in GVA, coupled with an increase in hours worked, resulted in a large fall (10.4%) in labour productivity. 

a. Natural log growth x 100

Mining records the strongest MFP growth

Mining MFP rose 3.7% in 2019–20, recording the seventh consecutive rise in MFP. Mining productivity growth reflects:

  • Solid growth in GVA (4.9%), supported by continued strength in oil and gas extraction and increased demand in iron ore. 
  • Combined inputs grew at a slower rate than GVA. The moderate growth in combined input was mainly driven by subdued capital services growth (1.0%) as Mining transitions from investment to production.
  • Labour productivity rose 3.2% as GVA outpaced hours worked growth (1.7%). 

Solid MFP growth in Retail trade driven by a fall in hours worked

Retail trade MFP grew 3.6% in 2019-20, the largest growth since 2009-10. This was driven by:

  • A small decline in GVA (0.5%), driven mainly by a large fall in Motor Vehicle and Part Retailing as COVID-19 negatively impacted the industry. The fall was partially offset by a rise in Food Retailing and Other Store Based Retailing reflecting consumers' stockpiling non-perishable products and alcoholic beverages at the early stage of COVID-19.
  • Combined inputs saw a larger fall (3.9%), driven by a fall in hours worked of 5.3% and a marginal fall in capital services of 0.4%. The large fall in hours worked (5.3%) is likely indicative of a shift to online retailing and shorter trading hours due to COVID-19. 

Large MFP decline in Administrative and support services, reversing growing trend in previous years

MFP fell 7.8% in 2019-20, reversing an upward trend in the previous three years. The fall reflects:

  • GVA fell 4.9%, with weakness shown across all subdivisions. The divisions' GVA has been negatively impacted by COVID-19 and natural disasters. This saw reduced demand for employment and administrative services as well as travel related services.
  • Combined inputs grew 3.1%. The growth was primarily driven by strength in hours worked (3.4%) since the division is very labour intensive. A fall in GVA, together with an increase in measured hours worked, translated to a large decline (8.0%) in labour 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 the 2015–16 issue of Estimates of Industry Multifactor Productivity (cat. no. 5260.0.55.002).


MFP contributed an average of 0.8 percentage points (ppts) to GVA growth per year for the latest growth cycle (2011-12 to 2017-18). This shows an increased MFP contribution from the previous cycle (2003–04 to 2011–12), in which MFP was flat. Relative to earlier growth cycles, GVA growth in the latest cycle was more subdued, averaging 2.6%. Capital services contributed 1.2 ppts to GVA growth in the latest cycle, compared to 2.2 ppts in the previous cycle.

Contribution to output growth, by growth cycle, average percentage points
     Growth cycles 
 1998–99 to 2003–042003–04 to 2011–122011–12 to 2017–18
Output (GVA) growth (b)3.63.12.6
Contribution to output growth
(hours worked basis)		   
Capital services1.72.21.2
Hours worked0.70.90.5
Multifactor productivity1.20.00.8

b. Natural log growth x 100

Experimental productivity measures – Direct Aggregation Across Industries (DAAI) approach

Experimental productivity measures (Tables 20-23) present the estimated industry contributions to market sector labour productivity (LP) growth under an alternative decomposition framework, the direct aggregation across industries (DAAI) approach (see Experimental productivity growth accounts). This approach enables the separation of direct productivity and hour reallocation effects. In addition, it allows tracking industry origins of the market sector’s LP growth.

Contribution to market sector LP growth – by industry, 2019-20, percentage points
 Direct productivityHour reallocation
A Agriculture, Forestry and Fishing-0.30.0
B Mining0.50.2
C Manufacturing-0.3-0.1
D Electricity, Gas, Water and Waste Services-0.10.0
E Construction-0.30.1
F Wholesale Trade0.00.0
G Retail Trade0.30.3
H Accommodation and Food Services0.00.5
I Transport, Postal and Warehousing0.00.1
J Information, Media and Telecommunications0.2-0.1
K Financial and Insurance Services-0.10.2
L Rental, Hiring and Real Estate Services-0.20.0
M Professional, Scientific and Technical Services-0.1-0.1
N Administrative and Support Services-0.40.0
R Arts and Recreation Services0.10.2
S Other Services0.10.3
Total contribution-0.61.6

The direct productivity effect is measured as the sum of direct LP industry contributions. In 2019-20, the direct productivity effect detracted 0.6 ppts from the market sector’s LP growth. This reflects broad-based weakness in LP performance, with ten of the sixteen market sector industries recording a fall in LP.  The most significant detractors to aggregate growth were from Administrative and support services, Manufacturing, and Agriculture, forestry and fishing, reflecting large declines in LP in these divisions. Conversely, strength in LP in Mining and Retail trade made a positive contribution to market sector LP growth. 

The hour reallocation effect which captures compositional changes to hours worked across industries, was the key contributor (1.6 ppts) to market sector LP growth. The positive reallocation effect was largely resulted from lower LP industries seeing the largest falls in hours worked due to stricter containment measures in these industries. The most significant reallocation effects were found in Accommodation and food services, and Retail trade, which both saw large declines in hours worked in 2019-20. 

Experimental state productivity estimates

Experimental estimates of market sector aggregates for state and territory are in Tables 27 to 42, and more information is detailed in Feature Article: Experimental Estimates of State Productivity.

Due to hours worked falling faster than falls in output, LP growth across the states and territories was positive, except for Queensland.

The four large states (New South Wales (NSW), Victoria (VIC), Queensland (QLD) and South Australia (SA)) recorded negative MFP growth, whereas the remaining states and territories recorded positive MFP growth. 

  • The Northern Territory (NT) recorded the strongest MFP (11.9%) and LP (15.7%) growth, mainly due to the strength in Mining, following some recently completed LNG projects.   
  • QLD experienced declines in MFP (2.4%) and LP (1.8%), as natural disasters and COVID-19 containment measures resulted in a large contraction in output in 2019-20 as seen in most states. The state, however, saw a smaller fall in hours worked than most other states which drove additional weakness in MFP and LP. 

Caution is required when interpreting the 2019-20 positive LP growth seen in all states except QLD. Broadly this is due to hours worked contracting faster than output.  This result, in part, reflects the impact of natural disasters and COVID-19 containment measures. For more information see productivity measurement in the time of a pandemic.

MFP growth 2019-20, percentage change (c)

MFP growth 2019-20, percentage change
Mutifactor Productivity Growth New South Wales (NSW) : -0.9% Victoria (VIC): -1.2% Queensland (QLD): -2.4% South Australia (SA): -0.6% Western Australia (WA): 0.9% Tasmania (TAS): 0.7% Northern Territory (NT): 11.9% Australian Capital Territory (ACT): 1.0%

Labour productivity growth 2019-20, percentage change (c)

Labour productivity growth 2019-20, percentage change
Labour Productivity Growth New South Wales (NSW) : 0.5% Victoria (VIC): 0.2% Queensland (QLD): -1.8% South Australia (SA): 0.8% Western Australia (WA): 1.6% Tasmania (TAS): 3.2% Northern Territory (NT): 15.7% Australian Capital Territory (ACT): 1.7%

c. Natural log growth x 100

New South Wales – MFP contracted in 2019-2020

  • NSW market sector MFP detracted 0.9% from GVA growth which fell 1.8% in the year. This is the first fall in output growth for this state in time series. COVID-19 containment measures, in addition to other natural disasters, adversely impacted output growth in 2019-20. 
  • Capital services continued to grow steadily, contributing 0.5 ppts to output growth in the year. Hours worked saw the largest fall since 1995-96, detracting 1.4 ppts from GVA growth. 

Victoria – records negative MFP growth in 2019-20

  • In 2019-20, market sector MFP in VIC fell 1.2% contributing to the fall in GVA of 1.6%, the first fall since 1995-96. The weakness in output growth reflected the adverse impact of COVID-19 containment measures.  
  • Capital services contributed 0.7 ppts to output growth while hours worked detracted 1.1 ppts.
     

Queensland – continued fall in MFP growth in 2019-20

  • Market sector MFP fell 2.4% for QLD in 2019-20 while COVID-19 containment measures resulted in a large decline in GVA (2.3%). QLD saw a smaller fall in hours worked than most other states which drove additional weakness in MFP and LP.
  • Capital services contributed 0.4 ppts to GVA growth which was partially offset by a negative contribution from hours worked (-0.3 ppts). 

South Australia – records the second year of contraction in MFP

  • In 2019-20, market sector MFP in SA fell (0.6%) on the back of a larger fall (1.9%) in 2018-19. COVID-19 pandemic related restrictions and containment measures resulted in a 2.5% fall in GVA. 
  • The largest detractor to output growth was hours worked which detracted 1.8 ppts from GVA growth. Capital services also recorded weakness, falling 0.1%, which was the first fall in the timeseries.

Western Australia – records the third consecutive MFP growth

  • Market sector MFP in WA recorded a growth of 0.9% in 2019-20, the third consecutive growth. 
  • Market sector GVA grew 1.4% driven by Iron Ore Mining and Oil and Gas Extraction, which were largely unaffected by COVID-19 related restrictions.
  • Capital services contributed 0.7 ppts to growth in GVA while hours worked recorded a small fall, detracting 0.1 ppts from output growth.

Tasmania – moderate MFP growth recorded in 2019-20

  • Tasmania MFP grew 0.7% in 2019-20 following strong MFP growth of 4.3% in the previous year. Market sector GVA fell 1.0% on the back of solid growth over the previous three years. 
  • Capital services grew in the year, contributing 0.5 ppts to GVA growth, while a large fall in hours worked detracted 2.2 ppts from output growth.

Northern territory – records the strongest MFP growth of all states and territories in 2019-20

  • NT market sector GVA recorded strong growth in 2019-20 (8.2%), reflecting the transition from mining related construction to production. GVA growth in the territory was faster than other states and territories. The main contributor to market sector GVA growth was MFP growth (11.9%), outpacing the growth in other states and territories in 2019-20. 
  • The marked rise in MFP growth in the territory was due to strong growth in GVA accompanied by sizeable detraction in hours worked (3.2 ppts) and capital services (0.4 ppts).

Australian Capital Territory – MFP grew in 2019-20

  • In 2019-20, the ACT recorded softer growth in market sector GVA (1.5%) on the back of strong growth over the past five years. COVID-19 related restrictions and natural disasters have adversely impacted GVA growth in some industries. 
  • MFP growth contributed 1.0 ppt to GVA growth, while capital services contributed 0.6 ppts.
  • Hours worked fell slightly on the back of a large fall in 2018-19, detracting 0.1 ppts from GVA growth. 

Revisions

This publication incorporates revisions implemented in 2019–20 as follows:

  • The 2019–20 edition of the Australian System of National Accounts, which incorporates revisions in the 2018–19 annual supply and use tables. For specific details of the revisions, including changes to estimates, and the range of improvements incorporated, please see Australian System of National Accounts, 2019–20 (cat. no. 5204.0).
  • Revisions to hours worked as published in the Labour Force, Australia (cat. no. 6202.0). 
     

Frequently asked questions

About productivity statistics

Q. What is productivity?

Q. What is labour productivity?

Q. What is capital productivity and capital deepening?

Q. What is multifactor productivity?

Q. What measures are available?

Q. What are the different measures of labour input?

Q. What is KLEMS?

Q. Are productivity statistics revised?

Q. What is a growth cycle?

Q. Which industries are covered?

Q. Why do some industries not have productivity statistics?

Q. What is growth accounting?

Interpreting productivity results

Q. How is productivity data used?

Q. How do I interpret productivity results?

Q. What are some limitations of productivity analysis?

Q. How can I get more information on productivity?

Data downloads

Tables 1 to 19: Estimates of industry multifactor productivity

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Tables 20 to 26: Experimental estimates of industry multifactor productivity

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Tables 27 to 42: Experimental estimates of state productivity

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Previous catalogue number

This release previously used catalogue number 5260.0.55.002.

Methodology

Estimates of Industry Multifactor Productivity methodology, 2019-20 financial year

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