Estimates of Industry Level KLEMS Multifactor Productivity

KLEMS 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 2018-19, KLEMS multifactor productivity (MFP) grew, on a quality adjusted hours worked basis, in seven of the sixteen market sector industries.

Mixed results on contribution to gross output growth are recorded across industries in 2018-19:　

• The strongest increase in KLEMS MFP was recorded in Mining (1.6%), the sixth consecutive year of growth. Gross output grew 6.0%, the strongest result since 2013-14. Intermediate input was the main contributor (3.2 percentage points (ppts)), with Services component contributed 2.2 ppts. Hours worked also contributed 0.8 ppts and Non-IT capital contributed 0.38 ppts. This industry saw strong growth in oil and gas production. Iron ore and coal production also rose to meet offshore and steel production. Hours worked in Mining saw a big increase of 8.2% in 2018-19, being the strongest growth since 2011-12.  By comparison, capital services growth was subdued (1.0%), reflecting the completion of several large projects.
• The largest fall in KLEMS MFP was in Agriculture, forestry and fishing (4.3%). Driving this fall was a 6.3% contraction in gross output, with materials and services each detracting 1.0 ppts. Extreme weather conditions affected eastern Australia, reducing grain production, as well as the availability of pasture on livestock farms in drought affected regions, Since the late 1990s, the industry has moved to more capital-intensive farming practices. However, 2018-19 saw a shift towards materials and services associated with drought mitigation efforts, such as increased expenditure on purchased feed for livestock. 
• Wholesale trade recorded the second largest fall in KLEMS MFP (-1.6%) Gross output fell 0.7%, reversing the growth in three previous years. KLEMS MFP drove the fall, detracting 1.6 ppts. Intermediate inputs also detracted 1.3 ppts, with falls in all three components: energy, materials and services. All three components of intermediate inputs saw declines with Services detracting 0.8 ppts, followed by Materials (0.4 ppts) and Energy (0.1 ppts). The strongest positive contribution to gross output growth was hours worked (1.8 ppts). 

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, for example: 

• Construction depends heavily on services intermediate inputs which represent nearly half of the industry's total input costs.
• Administrative and support services is a labour intensive industry, with labour services accounting for over half of the industry's total input costs.
• Mining is very capital intensive, with non-IT capital services representing nearly half of the industry's total input costs.

Industries may also undergo structural change over time, such as, responding to changes in the relative prices of inputs, which can cause an industry's cost shares to vary. For example, comparing the sum of the combined primary inputs (labour and capital) to intermediate inputs indicates that Financial and insurance services and Administrative and support services have become less dependent on intermediate inputs, while Manufacturing and Construction have become more dependent on intermediate inputs.

This publication incorporates revisions as follows: 

• The 2019–20 edition of the Australian System of National Accounts, which incorporates revisions in the 2018-19 annual supply and use tables. For specific details of the revisions, including changes to estimates, and the range of improvements incorporated, please see Australian System of National Accounts, 2019–20 (cat. no. 5204.0).
• Revisions to hours worked as published in the Labour Force, Australia (cat. no. 6202.0). 

This release previously used catalogue number 5260.0.55.004.