Recent productivity outcomes and Australia’s potential growth

In recent years, employment has grown strongly while output has grown modestly. This implies a weak growth in labour productivity that is difficult to interpret. In this article, we explore some possible explanations for recent economic growth and labour productivity outcomes, with a focus on developments in the composition of growth. We also examine whether recent productivity outcomes hold any implications for the Australian economy's potential growth rate. We find that recent weak growth in output and strong growth in labour are indeed unusual when compared with previous experiences. However, we also find that the uncommon circumstances surrounding Australia’s mining boom explain some of the output and labour conundrum.