This document discusses Australia's productivity performance compared to the United States from 1966 to 2016. It shows that while Australia and the US had similar rates of GDP per capita, real wages, and productivity growth from 1966 to the 1980s, a large divergence opened up afterwards. Australia's productivity growth has been mediocre since the 1970s, with both business investment and multifactor productivity growth declining outside of the mining industry after the global financial crisis. The document examines research finding payoffs to exports, research and development intensity, and strategic management capabilities in boosting firm productivity and growth.

1. 1
Office of the Chief EconomistOffice of the Chief EconomistOffice of the Chief Economist
Telling macro stories about
productivity from micro data
Mark Cully
Chief Economist
June 2019

2. 2
A long run perspective on growth
GDP per capita, real wages and productivity, Australia and US, 1966 to 2016
Source: Derived from national accounts and price indices.
Notes: Hourly earnings is compensation of employees per hour worked, deflated by CPI.
60
80
100
120
140
160
180
Index(1991=100)
Australia
Labour productivity GDP per capita Hourly earnings
60
80
100
120
140
160
180
Index(1991=100)
United States

3. 3
A big divergence opens up
Growth in Australian real wages and productivity relative to the US, 1966 to 2016
Source: Derived from national accounts and price indices.
Notes: Hourly earnings is compensation of employees per hour worked, deflated by CPI.
70
80
90
100
110
120
130
1966 1971 1976 1981 1986 1991 1996 2001 2006 2011 2016
Index(1991=100)
Labour productivity Real hourly wage

4. 4
Australia’s productivity performance has been
mediocre
Multifactor productivity annual growth rates,
1975-76 to 2017-18, per cent
Source: Productivity Commission (2019), PC Productivity Bulletin — May 2019
Aggregate labour productivity annual growth
rates, 1975-76 to 2017-18, per cent

5. 5
Business investment declining
Outside mining, capital and R&D investment both fell away after GFC and have not recovered
•Business expenditure on R&D
(mining vs non-mining), 2000–01 to 2015–16
•Source: ABS (2019), National Accounts, Cat. No. 5206.0 •Notes: In 2011–12 data moved to collection on a biennial basis
Source: ABS (2019), Research and Experimental Development,
Businesses, Australia, Cat. No. 8104.0, ABS (2019), National
Accounts, Cat. No. 5204.0
•Private business investment
(mining vs non-mining), 2001 to 2017
0.0
0.2
0.4
0.6
0.8
1.0
1.2
2000-01 2002-03 2004-05 2006-07 2008-09 2010-11 2013-14
(biennial)
PercentofGDP
Non-mining Mining

6. 6
What is BLADE?

7. 7
Payoff to R&D varies by intensity
Firms with highest R&D intensity enjoy stronger returns
Impact of R&D intensity on turnover growth by quantile, 2001–02 to 2012–13
Source: Majeed, O. et. al. (2018), What drives high-growth? Characteristics of Australian firms

8. 8
Payoff to exporting
Performance
indicators
Growth in the first group over and above the second group
(percentage points)
Continuous exporter
vs non-exporter
Continuous exporter
vs switcher
Switcher vs non-
exporter
Employment 0.6 0.5 –
Value-added 3.9 1.7 –
Labour
productivity 6.3 2.3 1.2
Average wage
7.4 3.1 1.3
Capital
expenditure 1.2 1.1 0.3
Average annual growth differentials by export status 2004–05 to 2013–14
Notes: ‘–’ denotes statistically insignificant estimates.
Source: Tuhin, R. & Swanepoel, A. (2016) Export behaviour and business performance: Evidence from Australian microdata

9. 9
Payoff to management capability
Firms with strategic management focus have highest productivity levels across all size groups
Labour productivity and management capability by firm size, 2015–16
Source: Moran, I. et. al. (2018), Strategic management in Australian firms
60
70
80
90
100
110
120
130
10 100 1000
LabourProductvity($'000s)
Employment
Low Engagement Ad hoc Narrow-Focus Strategic

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