Productivity Growth, Changes in Efficiency and Technical Progress in the Private Sectors of the Australian Economy

This paper estimates the private sector productivity growth in the Australian economy by decomposing productivity growth into growth of efficiency and technical progress. The paper computes Malmquist indices of Total factor productivity (TFP) using a Data Envelopment Analysis (DEA)-like linear programming technique. In view of the lack of any study examining components of productivity growth at the sectoral level, the decomposition pattern of TFP growth as revealed in this paper should significantly contribute to the existing knowledge and policy debate on Australia’s private sector competitiveness. The results indicate that mean rates of technical efficiency growth and technical change over the period have been highest for Transport, Storage and Communication (TSC) and Mining (MIN) industries, respectively. It has been also found that although the average growth rates of efficiency and technical progress have been slow over the study period, annual average productivity growth rates improved in recent years. The findings also suggest that increased efficiency growth played a significant role in raising overall private sector productivity. The results reveal the benefits of deregulation and industry reforms introduced in the Australian economy since the 1980s.