Economic Output and Productivity

Performance of the Australian States

Presentation to

Productivity Perspectives Workshop ‘07

Presenter: Gudrun Meyer-Boehm

The research has been undertaken by Jim Hurley, Trinh Le, Sid Shanks, Mark Upcher of the Office of Economic and Statistical Research, Qld Treasury and their assistance is greatly appreciated. The content of this presentation should not be taken as necessarily reflecting their views and opinions.

• GSP and GSI per head of population

• Importance of the industry structure

• Decomposition of GSI per capita growth

• Importance of labour productivity

• S/T Net Capital Stock and Capital Services estimates

• Decomposition of Labour Productivity

• Capital Deepening and MFP

Overview

Real GSP per head of population,States, 1984-85 to 2005-06

20,000

25,000

30,000

35,000

40,000

45,000

50,000

55,000

60,000

1984-85 1987-88 1990-91 1993-94 1996-97 1999-00 2002-03 2005-06

NSW Vic Qld SA WA Tas Aus$m '04-05

NSW Vic Qld SA WA Tas AUS

1.9 2.0 2.4 1.9 2.8 1.5 2.1

Average Annual Growth Rates

Real GSP per head of population relative to the Rest of Australia, 1984-85 to 2005-06

70

80

90

100

110

120

130

1984-85 1987-88 1990-91 1993-94 1996-97 1999-00 2002-03 2005-06

Inde

x (R

OA

=100

)

NSW Vic Qld SA WA Tas

Real GSI per head of population relative to the Rest of Australia, 1991-92 to 2005-06

70

80

90

100

110

120

130

1991-92 1993-94 1995-96 1997-98 1999-00 2001-02 2003-04 2005-06

Ind

ex

(R

OA

=1

00)

NSW Vic Qld SA WA

Average annual growth rates, per cent, 1993-94 to 2005-06

NSW Vic Qld SA WA Aus

Labour productivity 1.7 1.9 2.0 1.9 2.0 1.8

Labour utilisation 0.5 0.7 0.6 0.4 1.1 0.6

Employment 0.5 0.5 0.5 0.5 0.5 0.5

Participation 0.4 0.4 0.4 0.2 0.6 0.4

Intensity -0.4 -0.2 -0.3 -0.3 -0.1 -0.3

Real GDP/GSP per capita 2.2 2.6 2.7 2.3 3.1 2.5

Terms of trade 0.6 0.3 0.5 0.6 1.3 0.6

Real GDI/GSI per capita 2.7 2.9 3.1 2.9 4.4 3.0

Contribution to GDI/GSI growth per head, per cent, 1993-94 to 2005-06

NSW Vic Qld SA WA Aus

Labour productivity 60.8 63.3 65.4 65.6 45.6 59.8

Labour utilisation 18.9 25.3 19.5 14.4 24.6 21.3

Employment 16.6 17.7 14.6 18.3 11.3 15.6

Participation 16.1 13.6 13.9 6.4 14.5 14.0

Intensity -13.8 -5.9 -9.0 -10.3 -1.3 -8.3

Real GDP/GSP per capita 79.7 88.6 84.9 80.0 70.2 81.1

Terms of trade 20.3 11.4 15.1 20.0 29.8 18.9

Real GDI/GSI per capita 100 100 100 100 100 100

Labour Productivity1984-85 to 2005-06

30

35

40

45

50

55

60

1984-85 1987-88 1990-91 1993-94 1996-97 1999-00 2002-03 2005-06

NSW Vic Qld SA WA Tas Aus

NSW Vic Qld SA WA Tas Aus

1.4 1.5 1.6 1.4 2.0 1.1 1.5

Average Annual Growth Rates

Labour Productivity, Capital Deepening and MFP

Labour productivity growth

• Capital deepening

• Multifactor productivity

S/T capital stock data

• Net capital stock estimates

• Capital services estimates

S/T multifactor productivity data

State and Territory net capital stock estimates

• Research extends previous work by (Mikhailitchenko,

Nguyen and Smith, 2005)

• Perpetual Inventory Method accumulates State Gross Fixed

Capital Formation (GFCF) by asset type

• Allocation of national net capital stock to the states

“Capital services” for States and Territories

• Net capital stock

• Productive capital stock

“Capital services” constructed by scaling-up net capital stock growth rates to align with Australian market sector growth rates by asset type

Scaling Factors - ratio between the Australian capital service index and the Australian net capital stock index.

Capital services and Net Capital stock, Australian market sector, 1974-75 to 2005-06

100

150

200

250

300

350

1974-75 1980-81 1986-87 1992-93 1998-99 2004-05

Index

Capital Services

Net capital stock

Capital Stock and Services Growth, average annual growth, 1984-85 to 2005-06

State Net Capital Stock Capital Services

NSW 2.7 3.7

Vic 2.8 3.9

Qld 3.1 3.9

SA 1.9 2.9

WA 3.1 4.2

Tas 1.7 2.6

AUS 2.9 3.8

State Multifactor Productivity,average annual growth

State 84-85 to 05-06

(%)

84-85 to 93-94

(%)

93-94 to 05-06

(%)

NSW 0.8 0.6 1.0

Vic 0.7 0.2 1.1

Qld 1.3 0.8 1.6

SA 0.9 0.5 1.3

WA 1.3 1.2 1.3

Tas 0.5 -0.1 0.9

Decomposition of Labour Productivity,average annual growth, 1984-85 to 2005-06

0.60.7

0.30.5

0.7 0.6

0.80.7

1.3 0.9

1.3

0.5

0.0

0.5

1.0

1.5

2.0

NSW Vic Qld SA WA Tas

Capital Deepening MFPPercent

Conclusions

• Labour productivity key driver of output and income growth • ToT effect beneficial for all States, although different

magnitude• Industry structure appears important

• Updated net capital stock estimates

• Capital service method looks promising for construction of

improved state and territory productivity estimates

• Contribution of MFP to LP growth has been strong for most

States, in particular since 1993-94.

• Magnitude of MFP and capital deepening contributions to LP

growth varies across States.

Further work

• Further testing of capital methods

• Treatment of land and inventories,

• Quality of labour adjustment

• Can GSP(P) data be exploited to improve estimates

• Better measurement of non-market sector