Labour productivity freefall has 'bottomed out': Commission
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The news: Labour productivity increased for the second quarter in a row during the three months to December 2023, suggesting a return to "productivity normal" after the effects of Covid, according to the Productivity Commission.
The numbers: The advisory body found that labour productivity increased by 0.5% in the December quarter, as hours worked fell by 0.3% while output increased by 0.2%.
Despite the recent climb, however, labour productivity still fell by 0.4% over the 12 months to December.
Labour productivity, which increased in half of the market sector industries, grew the most in information, media and telecommunications (11.9%) and accommodation and food services (6.0%), with those industries also seeing the largest falls in hours worked.
Employed people working fewer hours drove the overall decline in hours worked, with the number of people employed increasing by 0.5% and hours worked per worker falling by 0.8% — or roughly 15 minutes per week.
The context: Productivity Commission deputy chair Alex Robson noted that labour demand in Australia has been historically high in recent years, which has seen an influx of less experienced workers into the workforce. Robson believes this trend has temporarily restricted labour productivity growth, as new workers require time to learn and upskill.
Robson cautioned that while there are "positive signs" in the latest data, Australia's productivity still sits just above the average from 2015 to 2019. He said that governments would need to continue advancing productivity enhancing reforms to see "green shoots flourish" into more meaningful productivity growth.
What they said: "For two quarters in a row Australians produced more while working fewer hours. And while monthly labour force data is volatile, we can now say with a bit more confidence that the freefall in labour productivity that began in June 2022 has likely bottomed out," Robson said.
"The sharp decline in productivity since June 2022 was due mostly to the end of the Covid-19 ‘productivity bubble’.
"Labour productivity rose significantly at the start of the pandemic, as workers temporarily moved from relatively low productivity sectors towards high productivity sectors, before declining as lockdown restrictions eased."
The source: Productivity Commission media release
