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Productivity Commission
Paula Barnes
Productivity Analysis Branch
Productivity Commission
PC-ABS Productivity Perspectives Conference, Canberra 20 November 2012
Productivity in Australian Manufacturing:
Some preliminary results
Productivity Commission 2
MFP for manufacturing and the market sector
Data source: ABS (Cat. no. 5260.055.002, 2010-11)
1985-
86
1986-
87
1987-
88
1988-
89
1989-
90
1990-
91
1991-
92
1992-
93
1993-
94
1994-
95
1995-
96
1996-
97
1997-
98
1998-
99
1999-
00
2000-
01
2001-
02
2002-
03
2003-
04
2004-
05
2005-
06
2006-
07
2007-
08
2008-
09
2009-
10
2010-
11
60
70
80
90
100
110
120
MFP Manufacturing
MFP Market sector (12 industries)
Index 2009-10 = 100
Productivity Commission 3
MFP for manufacturing and the market sector over cycles
Data source: ABS (Cat. no. 5260.055.002, 2010-11)
1988-
89
1993-
94
1998-
99
2003-
04
2007-
08
2010-
11
60
70
80
90
100
110
120
Mfg 0.0Mkt 0.9
Mfg 0.6Mkt 2.5
Mfg 1.3Mkt 1.2
Mfg -1.4 Mkt 0.0
MFP Manufacturing
MFP Market sector (12 industries)
Av. annual growth
Incomplete cycle
Mfg -0.8
Mkt -1.0
Cycle 1 Cycle 2 Cycle 3 Cycle 4
Index 2009-10 = 100
Productivity Commission 4
Large decline in Manufacturing MFP growth between the last 2 complete cycles
Data source: ABS (Cat. no. 5260.055.002, 2010-11)
1998-99 to 2003-04 2003-04 to 2007-08 difference between cycles-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
Manufacturing MFP growth (average annual % growth by productivity cycle)
Cycle 3 Cycle 4
1.3
-1.4
-2.7
Productivity Commission 5
Less negative MFP growth in the incomplete period
Data source: ABS (Cat. no. 5260.055.002, 2010-11)
2003-04 to 2007-08 2007-08 to 2010-11 difference between pe-riods
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
Manufacturing MFP growth (average annual % growth by productivity cycle)
Cycle 4 Incomplete cycle
-1.4
-0.8
0.6
Productivity Commission 6
What does negative MFP growth mean?
• Technological regress?
• Compositional effects?
• New impediments; new standards?
• Producers making poor decisions?
• Adjustment?
• Measurement issues?
Productivity Commission 7
Approach to analysis
• Aggregate manufacturing − Proximate causes of MFP growth
(growth in VA, K, L)
• Subsectors within manufacturing− Main contributors to aggregate decline− Proximate causes of MFP growth− Possible influences on the main
contributors
Productivity Commission 8
Proximate causes of the MFP growth decline in manufacturing
Data source: ABS (Cat. no. 5260.055.002, 2010-11)
1998-99 to 2003-04 2003-04 to 2007-08 Difference between the cycles
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
Value added growth Weighted hours worked growth Weighted capital services growthMFP growth
Cycle 3 Cycle 4
Growth in VA, inputs and MFP(average annual % growth by productivity cycle)
Productivity Commission 9
Subsector MFP estimates
• Manufacturing divided into 8 subsectors (still diverse in activities) • Food, beverage & tobacco products (FBT)• Textile, clothing & other mfg (TCO)• Wood & paper products (WP)• Printing & recorded media (PRM)• Petroleum, coal, chemical & rubber products (PCCR)• Non-metallic mineral products (NM)• Metal products (MP)• Machinery & equipment mfg (ME)
• Data and methodological limitations
Productivity Commission 10
… how does MFP growth vary across subsectors?
Food, beverage & tobacco products (FBT)
Petroleum, coal, chemical & rubber products (PCCR)
Printing & recorded media (PRM)
Textile, clothing & other manufacturing (TCO)
Wood & paper products (WP)
Metal products (MP)
Machinery & equipment manufacturing (ME)
Non-metallic mineral products (NM)
Total manufacturing - ABS
-6.0 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0
Cycle 3: 1998-99 to 2003-04 Cycle 4: 2003-04 to 2007-08
% per year
Data source: Authors’ subsector estimates (preliminary); Total manufacturing ABS (Cat. no. 5260.055.002, 2010-11)
Productivity Commission 11
Change in subsector MFP growth between cycles 3 and 4
Printing & recorded media
Petroleum, coal, chemical & rubber products
Textile, clothing & other manufacturing
Food, beverage & tobacco products
Total manufacturing (ABS)
Metal products
Machinery & equipment manufacturing
Non-metallic mineral products
Wood & paper products
-10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0
-9.3
-4.7
-4.1
-3.7
-2.7
-2.3
-1.8
-1.4
-0.1
Change in average annual % growth
Data source: Authors’ subsector estimates (preliminary); Total manufacturing ABS (Cat. no. 5260.055.002, 2010-11)
Productivity Commission 12
Manufacturing subsector sizes(Shares of gross value added at basic prices 2009-10)
Data source: ABS (5204.0, 2010-11)
Food, beverage and tobacco products 22%
Metal products 20%
Machinery and equipment 18%
Petroleum, coal, chemical and rubber products 17%
Wood and paper products 7%
Textile, clothing and other manufacturing 7%
Non-metallic mineral products 5%
Printing and recorded media 4%
Productivity Commission 13
Subsector contributions to the decline in mfg MFP growth between the cycles 3 and 4
Data source: Authors’ estimates (preliminary)
Petroleum, coal, chemical & rubber products
Food, beverage & tobacco products
Metal products
Textile, clothing & other manufacturing
Printing & recorded media
Machinery & equipment manufacturing
Non-metallic mineral products
Wood & paper products
-1 -0.8 -0.6 -0.4 -0.2 0 0.2
-0.81
-0.73
-0.42
-0.40
-0.35
-0.32
-0.07
0.0
Percentage point change in contribution
Productivity Commission 14
Differing contributions to the proximate causes of the aggregate MFP decline
Data source: Authors’ estimates (preliminary)
FBT PCCR MP Rest of Manufacturing (5 Subsectors)-1.5
-1.0
-0.5
0.0
0.5
1.0
Value added Labour Capital MFP
Contributions to change in growth in aggregate manufacturing output, inputs and MFP between cycle 3 and cycle 4 (percentage points)
Productivity Commission 15
Metal products (MP)
Data source: Authors’ estimates (preliminary) based on ABS data
1998-99 to 2003-04 2003-04 to 2007-08 Difference between the cycles
-5
-4
-3
-2
-1
0
1
2
3
4
5
value added growth weighted hours worked growth weighted capital services growthMFP growth
% per year
Cycle 3 Cycle 4
Productivity Commission 16
Food, beverages and tobacco products (FBT)
Data source: Authors’ estimates (preliminary) based on ABS data
1998-99 to 2003-04 2003-04 to 2007-08 Difference between the cycles
-5
-4
-3
-2
-1
0
1
2
3
4
5
value added growth weighted hours worked growth weighted capital services growthMFP growth
% per year
Cycle 3 Cycle 4
Productivity Commission 17
Petroleum, coal, chemicals, and rubber products (PCCR)
Data source: Authors’ estimates (preliminary) based on ABS data
1998-99 to 2003-04 2003-04 to 2007-08 Difference between the cycles
-5
-4
-3
-2
-1
0
1
2
3
4
5
value added growth weighted hours worked growth weighted capital services growthMFP growth
% per year
Cycle 3 Cycle 4
Productivity Commission 18
• Less value adding − Declining domestic feedstock− Trend in importing refined fuel− Underutilised capacity
• Significant investment due to Cleaner Fuels Program − Higher quality fuels not fully reflected in
productivity measures
Influences on PCCR – Petroleum
Productivity Commission 19
• Diverse subdivision− Including plastics, paints, foam rubber,
adhesives and tyres
• Mixed influences − Greater import competition in plastics and
tyres− Increased demand from construction
‘boom’
Influences on PCCR – Polymers and rubber
Productivity Commission 20
• Very diverse subdivision− Industrial gases, fertilisers,
pharmaceuticals, cosmetics and cleaners (to name a few)
• Agricultural and mining related products− Strong demand growth− Investment to expand capacity, but slow
response in output – long lead times
Influences on PCCR – Chemicals
Productivity Commission 21
• Pharmaceutical products− Strong output growth and very strong
export growth− Between the productivity cycles, a
decline in investment and employment− Substantial increase in R&D
expenditure
Influences on PCCR – Chemicals (cont’d)
Productivity Commission 22
Three main subsectors have differing proximate causes of MFP decline
Data source: Authors’ estimates (preliminary)
FBT PCCR MP-1.0
-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
Value added Labour Capital MFP
Contributions to change in growth in aggregate manufacturing output, inputs and MFP between cycle 3 and cycle 4 (percentage points)
Productivity Commission 23
Summary and ongoing research
• Summary− Diversity− Multiple influences
• Ongoing research− Further work on influences− Linking the disaggregated picture with
the aggregate estimates