Understanding productivity trends

Market sector productivity — the output produced per hour worked — grew at an annual rate of 3.2 per cent during the five years to 1998-99, which was the fastest rate on record. In the five years to 2003-04, productivity growth eased to 2.2 per cent per year, which is around the average rate over the past four decades. On balance, business cycle fluctuations, international developments, investment in physical and human capital (including information and communication technology), and the movement of labour across industries did not cause this easing in productivity growth. Rather, these trends are apparent within a number of industries: mining, construction, utilities, wholesale trade, communications and finance and insurance. A closer inspection of these industries suggests that, with the exception of mining, the recent trends at least partly reflect an easing of growth rates towards their historical averages after the unusual productivity surge of the late 1990s.