COVID-19 has ended Australia’s enviable 28-year recession-free streak, and caused a severe contraction in economic activity, according to the latest research from the Productivity Commission.
Chair of the Productivity Commission, Michael Brennan said the PC Productivity Insights 2021: Recent Developments report analysed the latest productivity statistics from the Australian Bureau of Statistics (ABS) and explored the trends and new developments underlying the country’s recent productivity performance.
Mr Brennan said the Report found that while overall labour productivity rose weakly, multifactor productivity, a measure of how well the economy used its resources to produce output, fell for the first time in nearly a decade.
“The productivity impacts of this downturn were stark and sometimes counterintuitive,” Mr Brennan said.
“In addition, the interpretation of this year’s national accounts is complicated by potential measurement issues,” he said.
Mr Brennan said that while most industries experienced a contraction in both their production and employment, an industry’s overall productivity growth depended on which of the two experienced a greater contraction.
“This explains why productivity rose in some of the hardest hit industries such as arts and recreation — their output fell by less than their employment levels,” the Chair said.
He said the early months of the pandemic saw rapid rises in unemployment and falls in investment, participation rates and hours per worker, however, labour markets had recovered strongly in the months since the end of the 2019-20 financial year.
Mr Brennan said the swift recovery was mainly a reflection of the containment of COVID-19 and the removal of most domestic restrictions.
He said preventing business closures during the pandemic “undoubtedly” cushioned the downturn but the maintenance of assistance to firms as the effects of COVID-19 recede may support less productive firms and stymie future productivity growth.
“The decade ending 2019-20 was the worst decade of growth in 60 years, and even if the last year of growth is excluded then this nine-year period still compares unfavourably to past decades,” Mr Brennan said.
The Productivity Commission’s 60-page Report can be accessed at this PS News link.
