Estimates of Industry Multifactor Productivity

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Updates estimates of multifactor productivity (MFP) for industries and market sector aggregates.

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Reference period
2020-21 financial year
Released
13/12/2021
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COVID-19 impacts on productivity measures

Productivity measures in the ABS are based on the Australian System of National Accounts framework. The treatment of COVID-19 related policies within the national accounts will also impact productivity estimates. For the 2020-21 reference year, the national accounts treatment for the different COVID-19 related policies were documented in the spotlight articles “Classifying COVID-19 policy interventions in macroeconomic statistics” in the  September quarter 2020, December quarter 2020, March quarter 2021 and June quarter 2021.

Two spotlight articles, Productivity measurement in the time of a pandemic and Variations in the Utilisation of Productivity Inputs were released in the 2019-20 issue of ‘Estimates of Industry Multifactor Productivity’. The impacts to productivity measurement from COVID-19 containment measures, policies and government subsidies were discussed in these articles and remain relevant for the current reference year.

Revisions in this issue

This issue of Estimates of Industry Multifactor Productivity, incorporates historical revisions to gross value added, capital services and hours worked that were previously released in the Australian System of National Accounts, 2020-21. Further information about the revisions is detailed in Improved estimates of the annual national accounts: Results of the 2021 historical revisions.

The revisions to hours worked is a result of the implementation of the Australian Labour Account series into the national accounts from 1994-95 onwards. This input series replaces the Labour Force Survey hours worked series, impacting productivity measures throughout the time series. Further information on the implementation of the Australian Labour Account in productivity measurement is available as an article accompanied with this release in Improved estimates of hours worked in Productivity: Implementation of hours worked from the Labour Account .

Analysis of results

On an hours worked basis, market sector MFP rose 0.2% in 2020-21. Market sector gross value added (GVA) rebounded after a fall in the previous year, recording 0.6% growth. By comparison, combined labour and capital inputs grew 0.4%, reflecting capital services growth of 1.4% and a fall in hours worked of 0.5%. Market sector labour productivity grew 1.1% in 2020-21, the result of a rise in GVA and a fall in hours worked.

On a quality adjusted labour input (QALI) basis, MFP fell 0.2% and labour productivity only rose 0.4%. The weaker growth on a QALI basis reflects a positive contribution from changes to the composition of labour due to educational attainment and work experience.

Key figures market sector productivity, 2020-21
 Hours worked basisQuality adjusted hours worked basis
 % change% change
Multifactor Productivity0.2-0.2
Gross Value Added0.60.6
Labour Input-0.50.1
Capital Input1.41.4
Labour Productivity1.10.4

Estimates of industry productivity

In 2020-21, MFP growth was reported in nine market sector industries, while a fall in MFP was experienced in seven industries. The largest increases in MFP were in Agriculture, forestry and fishing (21.7%) and Wholesale trade (3.1%). The largest MFP falls were in Transport, postal and warehousing (7.8%) and Arts and recreation services (5.4%).

a. Natural log growth x 100

Agriculture, forestry and fishing records the largest MFP growth

MFP rose 21.7%, reversing the falls in MFP in the previous two years. This increase in productivity represents the strongest growth for the division since 2003-04 and the strongest growth of all industries in 2020-21. The MFP growth reflects:

  • A rise in GVA of 19.9%, reflecting easing drought conditions and more favourable weather. The industry strength was largely driven by the Agriculture subdivision, with Grains and Other Crops recording strong growth due to bumper grain harvests.
  • Combined inputs fell 1.8%, driven by a fall of 6.1% in hours worked and a marginal increase in capital services (0.1%). The fall in hours worked was due to COVID-19 related border closures restricting the inflow of agricultural workers.
  • Labour productivity recorded a 26.0% growth due to a strong rise in GVA coupled with a fall in hours worked.

a. Natural log growth x 100

Mining records first decline in MFP since 2012-13

Mining MFP fell 3.3%, recording the first MFP decline since 2012-13. The fall in Mining productivity reflects:

  • GVA fell 2.3% due to weakness across most of the industry’s subdivisions. The greatest fall was seen in the Coal Mining subdivision due to weak global demand for coal. The fall in GVA was partially offset by a rise in Iron Ore Mining reflecting increased export demand.
  • Combined inputs recorded moderate growth of 1.0%, driven by subdued capital service growth (0.9%) and a 1.8% rise in hours worked.
  • Labour productivity declined 4.1%, reversing the growth of the previous two years.

a. Natural log growth x 100

Solid MFP growth in Wholesale trade driven by strength in GVA

MFP recorded a 3.1% rise, the second largest MFP growth of all industries in 2020-21. The rise was driven by:

  • Solid growth in GVA of 6.6%, representing the largest rise since 1997-98. The rise in GVA was supported by a large increase in demand for Motor Vehicle and Motor Vehicle Parts for new passenger and industrial vehicles. The strength in GVA also came from increased demand for computer hardware, farm, and construction equipment, which saw a significant rise in Machinery and Equipment Wholesaling. Basic Material Wholesaling rose, reflecting positive downstream impacts from the agricultural industry.
  • Combined inputs rose 3.5%, reflecting a strong rise in hours worked (3.9%) and an increase in capital services (2.9%). A larger rise in GVA compared to hours worked translated to a 2.7% rise in labour productivity.

a. Natural log growth x 100

Transport, postal and warehousing records the largest decline in MFP

MFP recorded a 7.8% decline, representing the largest fall of all industries in 2020-21. This was driven by:

  • GVA which fell 8.7%, representing the division’s largest fall on record. This reflects a significant fall in Air and Space Transport due to COVID-19 related border closures. The fall was partially offset by high demand for Postal and Courier Pick-up and Delivery Services and Road Transport due to online retailing and increased freight services respectively.
  • Combined inputs fell 0.8%, reflecting a decline of 3.0% in hours worked and an increase in capital services of 2.6%. A larger decline in GVA than in hours worked resulted in a 5.7% contraction in labour productivity.

a. Natural log growth x 100

Financial and insurance services records a small MFP growth

MFP recorded a 0.4% rise, representing the highest growth since 2016-17. This was driven by:

  • GVA which rose 1.7%, reflecting an increase in demand for Finance services for dwelling loans amid increased housing market activity. Demand for Insurance and Superannuation Funds increased, as employer and personal contributions rose.
  • Combined inputs rose 1.3%, driven by strength in hours worked (4.0%) and a marginal fall in capital services of 0.1%.

The Finance and insurance services industry was subject to large revisions as part of the 2021 historical revisions. The revisions impacted both GVA and hours worked, hence resulted in revisions in Financial and insurance services MFP. For more information on the historical revisions see Improved estimates of the annual national accounts: Results of the 2021 historical revisions.

a. Natural log growth x 100

Productivity growth cycles

Growth cycle analysis can minimise the effects of some temporary influences (such as variations in capital utilisation) by averaging productivity measures over a cycle. For more information about the productivity growth cycle, please see the Feature Article: Experimental Estimates of Industry Value Added Growth Cycles in the 2015–16 issue of Estimates of Industry Multifactor Productivity.

The 2021 historical revisions resulted in revisions to market sector MFP. The majority of market sector productivity growth cycles remained robust to the MFP revisions, with three of the four productivity peaks (in 1998-99; 2003-04; and 2017-18) remaining unchanged. A new productivity peak in 2009-10 was identified, which replaced the weakened peak in 2011-12.

Relative to earlier growth cycles, GVA growth in the latest cycle (2009-10 to 2017-18) was more subdued, averaging 2.8% in annual growth. MFP contributed an average of 0.7 percentage points (ppts) to GVA growth per year for the latest growth cycle. This shows an increase in MFP contribution from the previous cycle (2003–04 to 2009-10), in which MFP detracted 0.2 ppts from market sector GVA growth. Capital services remains the largest contributor, contributing 1.5 ppts to GVA growth in the latest cycle, compared to 2.2 ppts in the previous cycle.

The 2021 historical revisions also resulted in revisions in productivity peaks for a number of industries. For more information on the impact of hours worked revisions to industry growth cycle peaks, see Improved estimates of hours worked in Productivity: Implementation of hours worked from the Labour Account.

Contribution to output growth, by growth cycle, average percentage points
  Growth cycles 
 1998-99 to 2003-042003-04 to 2009-102009-10 to 2017-18
Output (GVA) growth (a)3.63.02.8
Contribution to output growth
(hours worked basis)		   
Capital services1.72.21.5
Hours worked0.91.00.6
Multifactor productivity1.0-0.20.7

a. Natural log growth x 100

Experimental productivity measures - Direct Aggregation Across Industries (DAAI) approach

Experimental productivity measures (Tables 20-23) present the estimated industry contributions to market sector labour productivity growth under an alternative decomposition framework, the direct aggregation across industries (DAAI) approach (see Experimental productivity growth accounts). This approach enables the separation of direct productivity and hour reallocation effects. In addition, it allows tracking industry origins of the market sector’s labour productivity growth.

Contribution to market sector LP growth – by industry, 2020-21, percentage points
 Direct productivityHour reallocation
Agriculture, forestry and fishing0.80.1
Mining-0.60.2
Manufacturing0.20.0
Electricity, gas, water and waste services-0.20.1
Construction0.20.1
Wholesale trade0.20.0
Retail trade0.2-0.1
Accommodation and food services0.00.0
Transport, postal and warehousing-0.40.0
Information, media and telecommunications-0.10.1
Financial and insurance services-0.30.2
Rental, hiring and real estate services0.00.0
Professional, scientific and technical services0.30.0
Administrative and support services-0.20.1
Arts and recreation services-0.10.0
Other services0.10.1
Total contribution0.10.9

The direct productivity effect is measured as the sum of direct labour productivity industry contributions. In 2020-21, the direct productivity effect contributed 0.1 ppts to the market sector’s labour productivity growth. The largest contributors to aggregate labour productivity growth were Agriculture, forestry and fishing, Professional, scientific and technical services. The largest detractors from aggregate labour productivity growth were Mining and Transport, postal and warehousing, reflecting declines in labour productivity in these industries.

The hour reallocation effect captures compositional changes to hours worked across industries. In 2020-21, the reallocation effect was the key contributor (0.9 ppts) to market sector LP growth. Industries with high level of labour productivity such as Mining and Financial and insurance services saw an increase in the hours worked in 2020-21. The reallocation of hours worked towards these highly productive industries contributed positively to the market sector labour productivity growth. 

Experimental state productivity estimates

Experimental estimates of market sector aggregates for state and territory are in Tables 27 to 42. For more information on State productivity estimates see Feature Article: Experimental Estimates of State Productivity.

In 2020-21, labour productivity and MFP results were mixed across the states and territories:

  • Negative MFP growth was experienced in the large states of New South Wales, Victoria, Queensland along with MFP declines in Tasmania and the Northern Territory. South Australia recorded the strongest MFP growth (2.6%). High MFP growth was attributable to strong rise in the market sector GVA in South Australia, driven by strength in Agriculture, forestry and fishing, Manufacturing and Wholesale trade.
  • Most states and territories experienced positive growth in labour productivity excluding Queensland and Tasmania. South Australia recorded the strongest labour productivity growth (3.2%) for the year, while Tasmania saw the largest fall (3.6%). 

MFP growth 2020-21, percentage change (a)

Mutifactor Productivity Growth New South Wales (NSW) : -0.3% Victoria (VIC): -0.2% Queensland (QLD): -0.5% South Australia (SA): 2.6% Western Australia (WA): 1.3% Tasmania (TAS): -0.6% Northern Territory (NT): -0.1% Australian Capital Territory (ACT): 0.5%
New South Wales (NSW) : -0.3% Victoria (VIC): -0.2% Queensland (QLD): -0.5% South Australia (SA): 2.6% Western Australia (WA): 1.3% Tasmania (TAS): -0.6% Northern Territory (NT): -0.1% Australian Capital Territory (ACT): 0.5%

a. Natural log growth x 100

Labour productivity growth 2020-21, percentage change (a)

a. Natural log growth x 100
Labour Productivity Growth New South Wales (NSW) : 0.3% Victoria (VIC): 2.2% Queensland (QLD): -0.9% South Australia (SA): 3.2% Western Australia (WA): 2.9% Tasmania (TAS): -3.6% Northern Territory (NT): 3.2% Australian Capital Territory (ACT): 0.7%

a. Natural log growth x 100

New South Wales – records the third year of contraction in MFP

  • New South Wales market sector MFP contracted for the third consecutive year in 2020-21, falling 0.3%. GVA output rebounded, growing 0.4% due to the easing of the COVID-19 restrictions that drove declines in output in 2019-20.
  • Capital services recorded solid growth of 1.5% in 2020-21, while hours worked recovered, rising 0.2% compared to a fall of 3.0% in the previous year. Strong growth in inputs, particularly capital services, outstripped the growth in GVA resulting in negative MFP growth in 2020-21.

Victoria - MFP falls in 2020-21

  • Victoria MFP fell 0.2% in 2020-21 after flat growth in the previous two years. GVA output fell for the second consecutive year as a result of the negative impact of COVID-19 restrictions and lockdowns on economic activity.
  • Inputs experienced mixed results with hours worked declining 3.7% but capital services growing 2.2%. Despite hours worked falling faster than GVA, the growth in capital services caused MFP growth to fall as a result.

Queensland – MFP contracts for third consecutive year

  • Market sector MFP in Queensland shrunk 0.5% in 2020-21 after declines in the previous two years. GVA output rebounded, increasing 1.0% after two consecutive years of declines.
  • Hours worked rose 1.9%, recording only the second year of growth in seven years while capital services grew for the twenty-sixth consecutive year, increasing by 1.0% in 2020-21.

South Australia – Records strongest MFP growth of all states and territories in 2020-21

  • In 2020-21, South Australia led the states in market sector MFP, rising 2.6%, its strongest growth in over two decades. GVA also recovered after declines in the previous year, rising 4.1%, the largest increase since 2007-08. Recovery was evident as the state moved out of COVID-19 related restrictions and containment measures, while a bumper crop harvest in Agriculture also strongly contributed to the rise.
  • GVA growth outpaced growth in both inputs, with hours worked rising 0.9% while capital services rose 2.1%. This resulted in the strong growth in MFP in 2020-21.

Western Australia – Continues MFP growth in 2020-21

  • Western Australia recorded its fourth consecutive year of growth in MFP, rising 1.3% in 2020-21. Annual MFP growth in Western Australia has averaged 0.7% over the last decade.
  • Market sector GVA grew 1.8%, attributed to continued Iron Ore Mining activity driven by strong overseas demand.
  • Capital services increased 1.4%, easing some of the growth in MFP after hours worked declined 1.1% for the sixth time in the last decade.

Tasmania – MFP falls in 2020-21

  • Market sector MFP fell 0.6% in 2020-21, after experiencing solid growth in the three previous years. Tasmania recorded sizeable growth in GVA of 4.8%, the highest of all states and territories, and the largest increase since 2007-08. The rise in GVA was supported by strength in Agriculture, forestry and fishing, Wholesale trade and Manufacturing. 
  • Combined inputs of hours worked and capital services also rose sharply, up 8.3% and 2.1% respectively. The growth in inputs outpaced the rise in GVA, resulting in MFP falling in 2020-21.

Northern Territory – Records a small fall in MFP in 2020-21

  • MFP declined 0.1% in 2020-21 after record growth of 11.9% in 2019-20. GVA contracted 2.7% in contrast to the previous year where it grew 8.2%, the strongest growth since 2012-13. The fall in GVA reflects weakness in Mining, driven by Oil and Gas Extraction where production volumes reduced in response to falling commodity price.
  • Hours worked declined in the Northern Territory, for the fourth consecutive year, falling 5.9% while capital services fell 0.3%.

Australian Capital Territory – Records eight consecutive years of MFP growth in 2020-21

  • Market sector MFP grew 0.5% for ACT in 2020-21, the weakest growth in the last eight years. GVA grew 2.3%, lower than the average annual growth of 3.3% in the last decade.
  • Capital services continued to grow, rising 2.2% in 2020-21, while hours worked rose 1.6% after falling in the previous two years.

For more information on experimental estimates of state and territory productivity (Tables 27 to 42), see Feature Article: Experimental Estimates of State Productivity.

Frequently asked questions

Q. What is productivity?

Q. What is labour productivity?

Q. What is capital productivity and capital deepening?

Q. What is multifactor productivity?

Q. What measures are available?

Q. What are the different measures of labour input?

Q. What is KLEMS?

Q. Are productivity statistics revised?

Q. What is a growth cycle?

Q. What industries are covered?

Q. Why do some industries not have productivity statistics?

Q. What is growth accounting?

Interpreting productivity results

Q. How is productivity data used?

How do I interpret productivity results?

Q. What are some limitations of productivity analysis?

Q. How can I get more information on productivity?

Data downloads

Tables 1 to 19: Estimates of industry multifactor productivity

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Tables 20 to 26: Experimental estimates of industry multifactor productivity

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Tables 27 to 42: Experimental estimates of state productivity

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Methodology

Estimates of Industry Multifactor Productivity methodology, 2020-21 financial year

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