Australians are working more than ever to make ends meet but that’s not necessarily translating into extra goods and services.

The mining sector led a two per cent fall in labour productivity growth in the June quarter as highlighted in a report from a national economic body.

The Productivity Commission said the mining industry made up about one-third of the total labour productivity decline, with bad weather and maintenance weighing on the amount of iron ore that could be mined and oil and gas that could be extracted.

The slowdown in output per hours worked was felt across most of the economy, however, with 15 of 19 industries recording a fall.

The arts and recreation services industry recorded the sharpest fall, sinking 7.6 per cent as hours worked jumped while output lifted modestly.

Productivity Commission acting chair Alex Robson said Australians were working a record number of hours to make more money and counter the rising cost of living.

“But even though hours worked rose, the rise in output was more modest, and that shows up as a reduction in labour productivity,” he said.

Output lifted 0.4 per cent across the economy but hours worked for the whole economy jumped 2.4 per cent, amounting to a two per cent fall in labour productivity.

“Negative productive growth means that on average, Australians worked more hours just to produce and buy the same amount of goods and services,” Dr Robson said.

“In other words, Australians have been running to stand still.”

The commission said the unwinding of the productivity growth boost from the pandemic could partly explain the sluggish improvements in 2023.

Productivity jumped during COVID-19 lockdowns as the least productive industries were unable to work.

But now, these industries are back in operation, marking the end of the pandemic “productivity bubble”.

The commission said the nation could not rely on a temporary boost to hours worked to drive productivity growth, with interest rate hikes and a slowing economy expected to weaken demand for work.

“We will only see sustainable, long-term productivity growth if we increase investment and innovation,” Dr Robson said.

The Reserve Bank of Australia has been warning about slow productivity growth in the context of returning inflation to target in a timely matter.

Former governor Philip Lowe repeatedly flagged the gap between wages and productivity as a risk factor to the inflation outlook.

 

Poppy Johnston
(Australian Associated Press)