Mining Sector Boosts Western Australia as National Productivity Rates Falter

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Although Australia's mining sector experienced an 18.5% drop in productivity in the 2011 financial year, it remains the country's most productive sector, according to PricewaterhouseCoopers (PwC) economist and partner Jeremy Thorpe.

But Australia as a whole has a labor productivity challenge, as national productivity grew only 0.4% in the year to June 30. This was down 1.7% from 2010, and the second-lowest productivity rate since 1996.

With a gross value added (GVA) of $250 an hour, mining is the most productive of the 16 sectors in the country. Thorpe said that labor productivity in the mining sector would continue to increase as mining investments moved to full capacity.

The report analyzed productivity on a state by state basis, and Western Australia (WA) was found to have a $12.9 billion productivity advantage over the rest of the country. But, Thorpe said, the dominance of WA's mining sector distorted its performance by forcing industries such as retail to do more with less. He cautioned employers and governments not to rely on the statistics as a gauge of overall performance. WA's higher productivity rate also was exacerbating pressures felt by other states, with the mining boom helping to drive up the Australian dollar, which hurt industries such as manufacturing, he said.

If the country has not experienced sustained productivity growth in non-resource industries when the resources boom eventually runs out, it will be relying on smaller and less productive industries, and it would be implausible to think that they could sustain the national standard of living, he said.

The report warned that that concerns about the decline in productivity performance also were magnified because productivity was slipping behind that of advanced competitors. In the 1990s, the country ranked 11th out of 25 OECD countries, but in the 2000s it slipped to 17th out of 34.

In the second quarter of the year, productivity achieved a 1.5% increase after a 2.6% decline the previous quarter, with the strongest growth experienced in wholesale trade and transport, postal and warehouse sector. Labor productivity growth was strongest in the Northern Territory, WA and Queensland.

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