A surge in employment combined with scant investment by firms to improve output triggered a sharp drop in worker productivity, limiting prospects for income growth without fanning inflation, the
Productivity Commission said in its annual report.
Across the economy, productivity fell 3.7% in 2022-23, as output growth failed to keep pace with a record 6.9% increase in hours worked, the commission said. A rush by employers to hire new staff
was much higher than in previous bursts – the nearest comparison was the 4.3% rise in hours worked in 1988-89.
“Australians’ incomes grew in 2022-23, mostly because they worked more hours,” said the commission’s deputy chair, Alex Robson. “But productivity growth is about working smarter, not working
harder or longer.”
Westfield Living Centres Welcome Back Customers And Businesses In Sydney As NSW Covid-19 Restrictions Ease<br>SYDNEY, AUSTRALIA - OCTOBER 11: Customers visiting Westfield Bondi Junction
on October 11, 2021 in Sydney, Australia. Westfield today welcomed back more customers and businesses across their NSW centres as non-critical retail reopened. COVID-19 restrictions have eased across
NSW today after the state passed its 70 per cent double vaccination target. Under the state government's Reopening NSW Roadmap, people who are fully vaccinated can attend retail and hospitality venues.
(Photo by James D. Morgan/Getty Images for Westfield)
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With labour market participation hovering near its record 67%, the economy has little scope to generate higher incomes by adding workers or time on the job, he said.
“What’s worse, we know nominal wage growth without productivity growth can fuel inflation,” Robson said. “Sustainable, long-term wage growth can only be realised by securing productivity gains.”
Employers, though, were also not doing their bit. The capital-to-labour ratio, one measure of spending on equipment to improve output, fell by a record 4.9% for the year.
“So while a record number of Australians had jobs, employers didn’t invest in the equipment, tools and resources that are needed to make the most of employees’ skills and talents,” Robson said. “
Further capital investment would help turn our strong employment growth into strong productivity growth.”
