Annual Report 2007-08
Annual Report Series, Productivity Commission, 2008
273 Pages Posted: 20 Aug 2010
Date Written: October 31, 2008
Abstract
The Productivity Commission’s 2007-08 Annual Report highlights the need to improve Australia’s productivity growth rate. Pursuing the right approach to innovation is key to achieving this. The pattern of Australia’s recent productivity growth and the scope to improve productivity by stimulating innovation is examined in the Commission’s most recent Annual Report.
Following a surge over the 1990s, productivity growth has slowed to below the long-term average. The slowdown cannot be fully explained, but is in large part due to the combined effects of the mining export boom (because of strong investment and lower yields) and drought. Compared with the 1990s, more effort in enterprises also seems to have gone into expanding production through investment and new hiring, rather than cost cutting.
While productivity growth in these sectors can be expected to improve, a sustained recovery in aggregate productivity growth will not be automatic, and attaining above-average growth will require improved performance in several key areas.
Productivity growth at the economy-wide level comes from innovation by enterprises, diffusion of these improvements to others and the reallocation of resources from less to more productive organisations and industries. For both the public and private sectors, it is at the level of organisations that innovation and diffusion occur.
International evidence suggests that market competition, rather than government assistance, is the main driver of innovation and its diffusion throughout an economy. Governments can make important contributions through promoting healthy competition, workplace flexibility and careful investments in platform capabilities, such as human capital and infrastructure.
Keywords: productivity
JEL Classification: D00
Suggested Citation: Suggested Citation
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