Annual productivity bulletin 2025

Learning but not always doing: Looking behind Australia’s productivity slump

A creeping inefficiency and failure to push the boundaries of innovation has contributed to Australia’s poor productivity performance over the past two decades.

Gains in labour productivity come from two sources: more investment (or capital deepening); and better ways of combining capital and labour to produce outputs – also known as multifactor productivity growth.

The Productivity Commission’s latest Annual productivity bulletin reveals that multifactor productivity growth has been almost non-existent in recent times.

Multifactor productivity in the market sector rose by 0.1% between 2022-23 and 2023-24. This was below the 20-year average annual rate of 0.3%, and far below the 1.6% annual rate recorded between 1994-95 to 2003-04.

PC Deputy Chair Alex Robson said the story was only slightly more positive for labour productivity.

‘Market sector labour productivity rose by 1.1% between 2022-23 and 2023-24,’ said Dr Robson. ‘This rise was due almost entirely to capital deepening (more capital per worker) – multifactor productivity growth contributed very little.’

In a new article, Learning but not always doing: Sources of multifactor productivity growth in Australia, PC economists Lawson Ashburner and Vincent Wong find that since the mid-2000s Australia has found fewer new and better ways of using inputs, and has also not made the best use of new ideas.

‘The research shows that creeping inefficiency over the past two decades or so has sapped our productivity performance,’ said Dr Robson. ‘This is a great reminder that multifactor productivity isn’t always all about cutting edge innovation – applying new ideas and doing more with what we have also matters.’

The annual bulletin shows that the agriculture, forestry and fishing industry saw the fastest multifactor productivity growth at 7.3% between 2022-23 and 2023-24, while multifactor productivity in the arts and recreation services industry dropped by 8.6%.

The latest Annual productivity bulletin is available from: pc.gov.au/productivity-insights.

Media requests

Media team – 02 6240 3330 / media@pc.gov.au

• Market sector productivity
• Productivity growth by industry
• Update from Alex Robson
• Learning but not always doing: Sources of multifactor productivity growth in Australia
  • The drivers of MFP differ by industry
  • What might explain these different movements in the MFP frontier and efficiency?
  • Australia’s MFP could be higher
• References
• Copyright and publication detail
• Appendix A: Additional data
  • A.1 Differences between decomposition-estimated productivity and official productivity
  • A.2 Industry-level decompositions
  • A.3 Mining prices and productivity
  • A.4 Composition of industry output