Here is the news:
Australian economy is now less productive than it was 10 years ago.
Let me spell that out: for a given quantity of labour and capital, Australia is now producing less than it was a decade ago.
And not just a trifle less; 5.18 percent less, to precisely report (the inevitably approximate) estimate of the Australian Bureau of Statistics. (5260.0.55.002 Estimates of Industry Multifactor Productivity, Table 2, 6 December 2013).
How has this remarkable feat been achieved? How - in the face of a decade of technical progress - has Australia managed to produce 5 percent less per unit of input than it was in 2002/3?
Several candidate explanations will not serve as answers. There has been no continuous succession of destructive ‘acts of God’ (droughts, flood) over the past decade, which would blunt the impact of impact of improving technology. Similarly, there has been no unremitting upward trend in the price Australia’s pays for the raw materials it imports, which would have the same effect. (GDP, remember, is the amount of income derived from the application of factors of production, and less income will be drawn for any given application of factors if imported raw materials cost more). Finally, ten years is long enough, presumably, for factor markets to be in equilibrium on average, and pay each factor what it adds to production: an implicit assumption of the ABS measure of ‘multi-factor productivity’.
Finally, the dismal productivity performance occurred over both Liberal and Labor governments; though the performance under the Rudd-Gillard epoch is worse than the Howard’s last five years. Consider the percent change in ‘multi-factor productivity’ year by year:
Here is my shot at this unwelcome marvel: the resources boom is to blame. It has given Australia gratuitous windfall income, and the entirety of society has taken this income out in the form of leisure on the job.
Whatever the cause, the ABS data is grist for a picture of creeping somnolence consuming Australia.