Productivity growth is 'going from bad to worse': PC

The latest quarterly productivity review released by the Productivity Commission (PC) found growth in hours worked remains strong (0.9% increase over the quarter, 2.2% increase over the year).

"The accounting is straightforward: the value of goods and services we produce is increasing, but not by as much as hours worked. In aggregate, we are working harder and longer, but we are not working smarter," PC deputy chair Alex Robson said.

"The results are particularly concerning in the market sector - labour productivity fell by 0.7% in the quarter, and only grew by 0.4% in the year to March. Non-market sector labour productivity fell by 0.3% in the March quarter, and by 0.1% over the year to March."

Robson said Australia's labour productivity appears stuck at the levels the nation settled into after the COVID-19 pandemic.

"We are now 0.1% below where we were in March 2023, when the 'productivity bubble' we saw during the pandemic burst," he said.

"A productive economy needs reliable and affordable energy. There has been significant investment over the past 20 years to replace coal assets reaching end of life. While this investment was clearly necessary, it has seen measured productivity fall significantly as there is a lag between when new energy assets are built and when they start producing at full capacity."

Robson added that some of the benefits of these investments, like improved network quality and lower emissions, are not picked up in conventional measures of productivity.

"This isn't to say that governments cannot do more to help ensure this transformation evolves in the most productive way possible. Australia should continue to identify and act on opportunities to improve productivity through the most efficient and cost-effective investments," Robson said.