Estimates of Industry Level KLEMS Multifactor Productivity

The KLEMS framework provides a detailed statistical decomposition on the contributions to output growth, represented by five input categories - capital (K), labour (L), energy (E), materials (M), and services (S). This allows for analysis on the changes to the input mix, such as the role of labour hours and composition of relative capital services or intermediate inputs, observed in industry output growth.

In 2022-23, KLEMS MFP fell, on quality adjusted hours worked basis, in nine of the sixteen market sector industries. 

Information, media and telecommunications saw the strongest growth in KLEMS MFP across the sixteen market sector industries, rising 2.2% following a 4.2% increase in 2021-22. At 11.0%, gross output experienced the strongest growth recorded for this industry, outweighing the rise in total inputs. Telecommunications experienced growth in handsets and mobile services, while internet publishing continued the recent expansion from the popularity of subscription video on demand services. Software publishing businesses adopted new technologies such as artificial intelligence enhanced software and cloud-based computing. Excess demand for workers with skills in software to adapt to these new technologies gave rise to some labour shortages for these specialised skillsets. Increased expenditure for software development and cloud services saw strong growth in intermediate inputs. The strong growth of total inputs resulted in softer KLEMS MFP growth compared to 2021-22.

Accommodation and food services recorded the largest decline (2.2%) in industry KLEMS MFP in 2022-23, following two consecutive years of strong KLEMS MFP growth. Although gross output volume recorded a strong rise of 12.9%, it was outpaced by the growth in inputs, particularly hours worked and intermediate inputs which contributed 9.6 percentage points (ppts) and 5.3 ppts to output growth respectively. Food and beverage services rebounded from re-opened local and international borders. Similarly, the resumption of many domestic and international tourism services saw growth in accommodation services. The strength of recovery, relative to other industries, reflected the higher impact of COVID-19 lockdowns on this industry. Employment surpassed pre-pandemic levels leading to a particularly strong resurgence in hours worked, which had declined throughout the pandemic. Similar to hours worked, other intermediate inputs such as food and beverage products, travel agencies and property operators were used at much higher volumes to satisfy the stronger demand for hospitality and tourism.

The rental, hiring and real estate industry experienced a decrease in KLEMS MFP of 1.6%, following two years of consecutive growth. Gross output grew 1.3%, following a strong growth in 2021-22, representing a softer growth than total inputs (2.9 ppts). The subdued growth in output reflected weaker activity in property operator and real estate services. High interest rates and inflation, among a range of factors, negatively impacted demand for real estate in 2022-23. Contrary to the weakness in output of real estate, strength was recorded for rental and hiring services. Goods and equipment rentals saw a strong rise, supported by new and resuming engineering projects. Motor vehicle transport and equipment rental and hiring services also rose. Demand for these services was due to an uptick of international arrivals and a backlog of orders. The use of intermediate inputs outpaced output growth, with significant volume growth for services. Services growth was seen for office administration, road freight transport, and repair and maintenance which was associated with higher asset utilisation and repairs for flood afflicted mines.

Construction productivity has been subdued over the last decade. Over this period, this industry experienced a declining trend in KLEMS MFP, showing a 0.7% fall in MFP for 2022-23. As in the previous year, gross output growth (4.4%) was outpaced by contributions to growth from total inputs (5.1 ppts). The output growth reflected strong public infrastructure spending in heavy and civil engineering construction. Non-residential building construction also increased, while construction trade services benefitted from strong demand. Partly offsetting this growth was a decrease in residential building construction output, reflecting a 10-year low residential building approval level. The increase of intermediate inputs was greater than output, due in part to completion delays, increased volumes of work, and other fixed costs. Many businesses in this industry experienced high costs for subcontractors, while skills shortages led to increased labour costs.

Contributions to output growth are calculated by multiplying the growth in inputs by their respective cost share. Two period average cost shares for each industry are reported in the table below.

Industry cost structures are very diverse varying from industry to industry and over time. In 2022-23, the largest cost shares were observed in the following industries:

• Mining is a typically capital-intensive industry, with non-IT capital services representing over half (58.9%) of the industry's total input costs. This has grown from the 56.6% cost share in 2021-22.
• Administrative and support services is a labour-intensive industry, with labour services accounting for 59.0% of the industry's total input costs.
• Manufacturing is reliant on materials for production, with materials representing nearly half (48.0%) of total input costs.
• Electricity, gas, water and waste services has one of the highest services cost shares among market sector industries (53.8%). Information, media and telecommunications also had a high cost share for services (53.7%).

Industries may also undergo structural changes over time, such as responding to changes in the relative prices of inputs, which can cause an industry's cost shares to vary.

This publication incorporates revisions as follows:

• Implementation of historical revisions in the national accounts: Impacts from the 2024 Annual National Accounts historical revisions | Australian Bureau of Statistics (abs.gov.au)
• Revisions to Labour Account’s hours worked reflecting methodological refinements and updated source data: Labour Account Australia, September 2024 | Australian Bureau of Statistics (abs.gov.au)

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This release previously used catalogue number 5260.0.55.004.