Comparing Australian and United States productivity

Despite a series of broad and deep macroeconomic and microeconomic reforms boosting Australia's productivity growth, the level of Australia’s GDP per capita remains well below that of the United States. A continuing gap in the levels of productivity plays a central role in explaining Australia’s GDP per capita relative to the US. This paper reviews various explanations for the Australia-US productivity gap and finds that the productivity gap can at least in part be explained by a combination of: differences in human capital as represented by educational attainment; differences in product and labour market policies; and the geographic and historical context in which the Australian economy operates. Differences in physical capital per worker and industry structures do not appear to be primary explanations for the productivity gap.