CAPITAL INPUTS

The slowdown in productivity growth in recent years has not been caused by any significant slowdown in output growth, but due to an increase in the growth in capital services. Figure 8.2 highlights the growth in capital services that has occurred since the late 1990s. One possible anecdotal explanation contributing to the increase since 2002-03 could be the centralisation of distribution centres occurring over recent years, which would involve significant new investment. For example, Woolworths is reducing its distribution centres down from 31 to 9 larger regional distribution centres (Woolworths 2006, p. 19).

Figure 8.4 highlights the significant growth in gross fixed capital formation (GFCF) since the late 1990s. Figure 8.5 shows this strong growth was in motor vehicles and industry machinery and equipment. Over the last three years, there was also growth in GFCF from electrical and electronic equipment, and computers (figure 8.6).

Besides the growth in GFCF, rental price weights also influence capital services. One asset that is not covered by GFCF data is inventories. From figure 8.6 it can be seen that inventories has a significant impact on capital services, with its high rental price weight. However, the inventories proportion of total capital rent has been relatively volatile, fluctuating from a 12% rental price weight to 40%. Other assets with relatively large rental price weights are non-dwelling construction, motor vehicles, and industrial machinery and equipment. Computers and software have been increasing their respective shares over the last two decades (figure 8.7).

Even though there has been strong growth in GFCF for motor vehicles in recent years, there has been little change to the trend pattern of growth in its productive capital stock (figure 8.8). Figure 8.8 also shows inventories, computers and software as accelerating their growth in productive capital stock since 2002-03.

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