ANALYSIS OF RESULTS

(Note: the data in this publication include hours worked estimates which incorporate interim census results. For this reason, estimates of Labour Productivity will not match those published in the Australian System of National Accounts (cat no 5204.0), published 27 October 2017. For more information, see Revisions section below.)

MARKET SECTOR

On an hours worked basis, market sector multifactor productivity (MFP) grew 0.6% in 2016–17, marking six years of growth since 2011-12. MFP growth was a result of a 1.9% increase in gross value added against a 1.3% increase in combined inputs. The input growth represents capital services growth of 1.9% and hours worked growth of 0.8%.

On a quality adjusted hours worked basis (QALI), market sector MFP grew 0.3%. The weaker growth in MFP measured on this basis is due to higher growth in quality adjusted labour input, reflecting positive contributions to labour quality from educational attainment and work experience.

Labour productivity grew 1.1% on an hours worked basis and 0.5% on a QALI basis. Labour productivity exhibited weaker growth than 2015-16, attributable to both weaker GVA growth and stronger hours worked growth in 2016-17.

	Hours Worked Basis	Quality Adjusted
		Hours Worked Basis
	% Change	% Change
Multifactor Productivity	0.6	0.3
Gross Value Added	1.9	1.9
Labour Input	0.8	1.4
Capital Input	1.9	1.9
Labour Productivity	1.1	0.5

INDUSTRIES

Of the 16 market sector industries, ten industries recorded MFP growth in 2016-17 while six industries saw a fall in MFP, on an hours worked basis. The largest MFP gains were experienced by Agriculture, forestry and fishing (+18.3%); Art and recreation services (+6.2%); and Wholesale trade (+4.0%). Tempering these gains were significant MFP declines in Construction (-7.3%); Manufacturing (-4.7%); and Other Services (-4.6%), as shown in Chart 2.


In 2016-17, on an hours worked basis, labour productivity growth was particularly strong for Agriculture, forestry and fishing (25.6%); Art and recreation service (10.7%). The exceptionally high labour productivity growth in Agriculture, forestry and fishing was primarily driven by very strong GVA growth (16.3%) due to an exceptionally good season for many agricultural products, coupled with a sharp decline in hours worked (7.4%).

In contrast, a sharp decline in labour productivity (7.3%) was experienced in Construction, reflecting a 4.1% decline in output and a 3.4% rise in combined inputs. The sharp drop in GVA was driven by continued contraction in the Heavy and Civil Engineering, and Construction services subdivisions, reflecting reductions in mining and heavy industrial projects. This is the fourth consecutive year that Construction saw a fall in MFP.




INDUSTRY SPOTLIGHT – Agriculture, forestry and fishing

Agriculture, forestry and fishing recorded GVA growth of 16.3% in 2016-17, due to an exceptionally good season for many agricultural products. Healthy output growth, coupled with a drop in hours worked in the industry, led to impressive growth in MFP (18.3%) and labour productivity (25.6%).

Chart 4 depicts the drivers of value added output growth in Agriculture, forestry and fishing over the entire time series for which data is available. For the period 1989-90 to present, the contribution from capital services has been modest, while hours worked has contributed negatively to output growth reflecting the reduction in hours worked over the period. The predominant driver for value added output growth has been growth in MFP which captures, among other things, changes in weather conditions.

	MFP	Output (GVA)	Labour input (HW basis)	Capital input	Labour productivity	Capital productivity
Agriculture, forestry and fishing	18.3	16.3	-7.4	0.7	25.6	15.5
Mining	0.5	1.1	-2.9	1.9	4.1	-0.8
Manufacturing	-4.7	-1.8	5.4	-1.3	-6.8	-0.6
Electricity, gas, water and waste services	1.2	0.4	-6.1	2.0	6.9	-1.6
Construction	-7.3	-4.1	3.5	3.2	-7.3	-7.1
Wholesale trade	4.0	6.2	1.9	2.6	4.2	3.6
Retail trade	3.2	1.4	-3.1	3.1	4.7	-1.6
Accommodation and food services	-1.6	1.9	4.4	0.5	-2.4	1.4
Transport, postal and warehousing	1.8	1.8	-1.7	2.1	3.5	-0.3
Information, media and telecommunications	-0.3	2.5	0.4	4.8	2.1	-2.2
Financial and insurance services	2.1	3.7	2.7	1.1	1.0	2.6
Rental, hiring and real estate services	0.1	2.1	0.5	3.1	1.6	-1.0
Professional, scientific and technical services	4.0	6.2	1.9	3.1	4.2	3.0
Administrative and support services	-3.4	-0.2	3.5	0.4	-3.5	-0.5
Arts and recreation services	6.2	0.8	-9.0	3.2	10.7	-2.3
Other services	-4.6	-2.6	1.5	6.6	-4.0	-8.6
Market sector (16)	0.6	1.9	0.8	1.9	1.1	0.0

PRODUCTIVITY GROWTH CYCLES

A common method of examining changes in productivity over an extended period involves identifying and dividing the data into productivity growth cycles. By analysing averages of productivity statistics between growth cycle peaks, the effects of some temporary influences (such as variation in capital utilisation) can be minimised, allowing better analysis of the drivers of productivity growth in different periods.

Due to the National Accounts historical revisions (which included revisions to GVA, capital stock and income shares) as well as revisions to hours worked (for more details, see Revisions section) the previously identified 2007-08 peak has weakened, giving rise to a robust 2011-12 peak. The current incomplete cycle (2011-12 to 2016-17) is recording average gross value added growth of 2.5%, which is lower than either of the two completed cycles. Relative to completed cycles, capital services growth has also slowed to 3.0% per annum on average. On a QALI basis, MFP recorded a small rise (0.5%), while LP grew 1.3% per annum on average. The weaker growth in quality adjusted labour productivity and MFP reflects a positive contribution from changes to labour composition.

		Growth Cycles	Current incomplete growth cycle
	1998-99 to 2003-04	2003-04 to 2011-12	2011-12 to 2016-17
Multifactor Productivity
Hours worked basis	1.2	-0.1	0.8
QALI basis	0.9	-0.3	0.5
Gross Value Added	3.6	3.1	2.5
Labour Input
Hours worked basis	1.1	1.6	0.7
QALI basis	1.6	2.1	1.2
Capital Input	4.2	5.3	3.0
Combined Input (K&L)
Hours worked basis	2.4	3.2	1.7
QALI basis	2.6	3.4	2.0
Labour Productivity
Hours worked basis	2.4	1.5	1.8
QALI basis	2.0	1.0	1.3

REVISIONS

This publication incorporates revisions implemented in 2016-17 as follows:

• The 2016-17 edition of Australian System of National Accounts (cat. no. 5204.0) incorporates historical revisions in the 2015-16 annual supply and use tables. The revisions impacted estimates of gross value added, capital services and income shares across the full time span. For specific details of the revisions, including changes to estimates, and the range of improvements incorporated in the historical revisions, please see Feature article: Improved estimates of the annual National Accounts.
• Revisions to hours worked across the full time span published in the Labour Force, Australia August 2017 (cat. no. 6202.0). These revisions impacted annual growth in hours worked indexes but averaged to zero over the timespan. For more information, please see Labour Force, Australia August 2017 (cat. no. 6202.0).
• Revisions to hours worked (from 2011-12 onwards) due to re-benchmarking of hours worked to incorporate updated Estimated Residence Population (ERP) figures which include interim 2016 Census results. For more information, please see Labour Force, Australia - Rebenchmarked Estimates October 2017 (cat. no. 6202.0.55.003).

FEATURE ARTICLES

This publication incorporates the experimental estimates of state and territory productivity, released for the first time. For specific details of the experimental estimates, please see the Feature article: Experimental estimates of state productivity.This release is also accompanied by a feature article: Trends in the labour income share in Australia.