Labor productivity declined in December quarter prompting long-term concerns
Make us a preferred source
Make us a preferred source on Google
The news: The Productivity Commission is warning that low productivity levels are becoming a long-term trend, with its latest quarterly bulletin revealing a 0.1% decline in labour productivity over the December quarter and a 1.2% decline over the year.
The context: Australia's labour productivity levels have been languishing for the past decade, which translates into limited growth in living standards. Both sides of the political aisle are aware of this problem and have varied views on how to tackle the issue, with significant disagreement over industrial relations policies in particular.
Economists widely think that new technology such as artificial intelligence could be a long-awaited game changer for productivity, but the timeframes and overall impacts are uncertain. The Productivity Commission is seeking "targeted reforms" to address productivity directly and is currently undergoing specific research to make recommendations to the government.
What they said: "The data makes it clear that our productivity problem is not a flash in the pan – this is a long-term, structural challenge that requires dedicated attention from government and industry," Productivity Commission deputy chair Alex Robson said.
"The COVID pandemic was a massive global economic shock. The pandemic and the policy response to it drove a sharp rise – and then a crash – in measured productivity. Now that the dust has settled, we're back to the stagnant productivity we saw in the period between 2015 to 2019 leading up to the pandemic," he said.
"Ultimately the COVID productivity bubble was just that: a bubble. We saw a sharp rise in productivity driven by the lockdowns which was then wiped out as lockdowns ended and hours worked reached record highs."
The source: Productivity Commission March 2025 bulletin
