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 2020-21, KLEMS MFP grew, on quality adjusted hours worked basis, in nine of the sixteen market sector industries.

• Agriculture, forestry and fishing saw the strongest rise in KLEMS MFP (8.5%) across the sixteen market sector industries, reversing the falls in MFP in the previous three years. Gross output rose 15.6%, the largest output rise on record for the division since 2003-04. The strength in output was driven by increased production of grain crops which benefitted from increased rainfall and high global grain prices. The growth in output was supported by the increased use of intermediate inputs which contributed 7.5 percentage points (ppts) to output growth. Use of services and materials in particular rose, contributing 4.5 ppts and 2.7 ppts to output growth respectively. In 2020-21, the labour market was impacted by international border closures restricting the inflow of migrant workers. As a result, hours worked detracted 0.3 ppts from gross output growth.
• Accommodation and food services posted a strong KLEMS MFP result, rising 3.0% following a 1.9% contraction in the previous year. This was the strongest growth in KLEMS MFP experienced in this industry since 1995-96. Gross output grew 1.5%, benefitting from the strong rise in productivity. The result reflected the recovery of economic activity as lockdowns eased and demand for food and beverage services rose. Softening the strength in gross output was hours worked which detracted 1.0 ppt from output growth. This was due to the combination of a constrained supply of workers due to border closures and the impact of pandemic-related restrictions in some states. Contraction in intermediate inputs detracted a further 0.6 ppts from output growth, with materials (detracting 0.8 ppts) driving down the otherwise positive result.
• The largest fall in KLEMS MFP was in Transport, postal and warehousing (3.2%). This fall contributed to the largest gross output contraction (6.8%) on record for the industry since 1995-96. Travel restrictions at both national and state levels along with border closures, resulted in a fall in domestic and international air passenger volumes, negatively impacting industry output. Intermediate inputs detracted 2.6 ppts from output growth, with energy and services weakening output by 1.6 ppts and 1.1 ppts respectively.
• Mining recorded a large fall (2.5%) in KLEMS MFP, marking the first fall in productivity for this industry since 2012-13. Gross output also experienced a fall (3.2%), the strongest fall since 1998-99. The fall in output was driven by strong declines in production volumes for Coal mining and Oil and gas extraction owing to adverse weather conditions, technical issues, and operational incidents. The use of energy, materials, and services fell in line with the drop in production volumes, detracting 1.4 ppts from gross output growth. Partly offsetting the fall in output was strength in Iron ore mining driven by record-high iron ore prices. Despite weakness in intermediate input use, labour and capital services still rose, contributing 0.3 ppts and 0.5 ppts to output growth respectively.
   

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 2020-21, 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 (52.6%) of the industry's total input costs.
• Administrative and support services is a labour-intensive industry, with labour services accounting for more than half (58.1%) of the industry's total input costs.
• Manufacturing is reliant on materials for production, with materials representing nearly half of total input costs.
• Information, media and telecommunications has the highest services cost share of all market sector industries, indicating strong outsourcing activity.

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 more information on the dynamic nature of industry cost shares, see Structural change in Australian industries – insights from the KLEMS Multifactor Productivity 2019-20 dataset.

This publication incorporates revisions as follows:

• The historical revisions incorporated into the national accounts in 2022, see Improved estimates of the annual national accounts: Results of the 2022 historical revisions.
• Revisions to Labour Account’s hours worked reflecting methodological refinements and updated source data, see Labour Account Australia, June 2022.
• Updated estimates of labour composition reflecting the latest available data from the 2021 Census of Population and Housing. More information will be available at Estimates of Industry Multifactor Productivity on 13 December 2022.

This release previously used catalogue number 5260.0.55.004.