Productivity

Question 1

what is productivity about?

Answer 1

• Making the most of the resources we have available
• Productivity grows when we produce more outputs for the same inputs
• In a measured sense, growth in productivity represents growth in outputs over and above the growth of inputs.
• Australia has over five times as productive as we were a century ago – this means that we generate five time as much wealth with the same amount of input
• Within the past 30 years, productivity has more the doubled.

Question 2

The benefits of productivity growth.

Answer 2

Improvement in the efficiency of resource use over time.

Is a sustainable way of growing incomes

Supports the consumption of the goods and services desired by the community

the ability of the economy to adapt as community desires change ( for example with an ageing population), and as resources become more scarce (e.g in cities).

Productivity improvements that increase the demand for low skilled workers mean higher wages and employment opportunities for those who have fewer skills.

If output can increase for less inputs then living standards can rise without eroding the quality of the environment.

Question 3

The productivity formula is…

Answer 3

productivity = output volume/ input volume

Question 4

what is Capital deepening

Answer 4

Increasing the quantity and quality of capital per worker

Question 5

what is single factor productivity

Answer 5

Single factor productivity measure is obtained when only one input appears in the denominator

Question 6

What is the labour productivity formula

Answer 6

labour productivity= output/(labour input (time))

Question 7

What is the capital productivity formula

Answer 7

capital productivity= output/(capital input (time))

Question 8

what is multifactor productivity

Answer 8

Measures the efficiency with which combined labour and capital inputs are transformed into outputs.

Question 9

What is the multifactor productivity formula

Answer 9

multifactor productivity= output/(labour+ capital inputs (time))

Question 10

drivers of labour productivity

Answer 10

o Investment in human capital – education and training

o Has been declining in the last three years

Question 11

Drivers of capital productivity

Answer 11

o Improved production techniques – technology and capital deepening
o Research and development - ICT
o Capital productivity has been increasing and has been a major source of MFP in recent years
o Capital deepening and increased capital to labour ratio

Question 12

drivers of multifactor productivity

Answer 12

better management practices

Question 13

other drivers of productivity growth

Answer 13

• Innovation and critical and creative thinking

o Organisational change
o Recognising opportunity and developing entrepreneurship
o Adapting to change (dynamic efficiency)
o Innovating
o Product & process change

Question 14

MFP in Australia can impact on:

Answer 14

• The way in which we finance innovation (start-up capital)
• The incentives for innovation through tax system
• The way we support human capital research
• The way we support entrepreneurship
• The way in which we promote competition
• Innovation is needed from public and private sector

Question 15

Benefits of productivity:

Answer 15

• Incomes rise
• Wages  motivation for workers rise
• International competitiveness
• Maintains/ improves living standards
• Achieves government policy aims

Question 16

The importance of productivity growth

Answer 16

• Productivity has been the main source of economic growth in Australia.
• It has been important in helping to raise international competitiveness and supporting the growth in per capita incomes in the community which ultimately leads to higher living standards.
• Objective of Microeconomic reforms = improvements in productivity
• Microeconomic reforms = government policies designed to improve the efficiency of firms and markets e.g. strengthening competition policy and reducing the assistance to industry in the form of tariffs and subsidies.
• Productivity Commission – The Australia