Economic reforms in the '80s and '90s did little to improve Australia's relative performance. This report reviews the main reasons for this shortfall, including unfavorable regulatory policies and shortfalls in the innovation levels of some companies.
Objectives and Approach
To help understand what was necessary to boost Australian productivity, MGI looked at labor productivity in five sectors. MGI focused on factors within a firm's control and those outside of it.
Implications
The main causes of lower productivity in Australia are within the power of businesses and the government to rectify. To improve standards of living, the government needs to establish policies that are an incentive for managers to improve productivity. Business leaders for their part need to adopt aspirations, management practices, and innovation levels that can lead them to world-class productivity.
Food Processing Sector
Australia's food processing sector accounts for a quarter of all jobs in the manufacturing sector and is the nation's biggest earner of export income. Labor productivity, however, is 68 percent behind the US and Denmark. Low capital levels, small-scale operations, and poor labor relations are a few of the reasons to blame.
Construction Sector
Contrary to popular belief, manufacturing productivity in the US in the early '90s was ahead of Japanese and German productivity. But wide variations across sectors indicated that all three countries had opportunities to improve by adopting best practices.
General Merchandise Retailing Sector
Though the landscape of the general merchandise retailing sector has gone through substantial changes in the post-war period, it has not been on the pace set by many global competitors. While the US has raced ahead with modern formats that increase productivity, Australia has been caught in a much slower development cycle.
Retail Banking Sector
Deregulation in the 1980s has led to profound changes in Australia's retail banking sector, with smaller banks challenging the nation's more established companies. But the bloated sector has been slow to change, undermining the opportunities for significant productivity improvements.
Aviation Sector
Deregulation and privatization has shaken up Australia's aviation sector leading to productivity improvements. While capital productivity levels compare well with European and American airlines, labor productivity is 16 percent lower than the US.
Appendix
Employment growth is a factor of strong productivity. But the road can be a bumpy one, with short-term employment decreases as industries adjust. This appendix explains the relationship between productivity and employment.
