Over the next 50 years, productivity is expected to be the main driver for economic growth and well being. This is coinciding with huge growth in technological change and innovation. This is why Australia’s productivity slowdown is so concerning. This is due to it being essentially a measure of efficiency. The three theories are that innovations don’t compare to ones made in the 1990s, innovation is still strong, but only in “Frontier firms”, and the final is that we simply may not be able to measure it yet.
- Productivity is not an easy concept to define. Essentially, it is a measure of the efficiency with which we can turn inputs into outputs, based on new technologies and business models, a capable and educated workforce and effective management of firms and organisations.
- During the mining boom, the deterioration of Australia’s productivity performance was masked by the boost to our terms of trade from higher commodity prices.
- With the end of the boom, it has become apparent that new sources of growth must be identified, re-positioning Australia as a more complex and diverse economy, embedded in global value chains.
“Productivity is not an easy concept to define.”