Productivity Commission

Peter Harris

Chairman, Productivity Commission

29 May 2014

Productivity Commission 2

Contributions to growth in average incomes – same LP growth as last ‘decade’

Note: 1.3 per cent labour productivity growth and no contribution from foreign income flows assumed to 2022Source: ABS cat. no. 5204.0, unpublished ABS data, Treasury calculations and PC calculations

Same growth as 2000-2012

Productivity Commission 3

Contributions to growth in average incomes – needed for long run GNI growth

Note: No contribution from foreign income flows assumed to 2022. Long-run GNI growth of 2.3 per cent a year.Source: ABS cat. no. 5204.0, unpublished ABS data, Treasury calculations and PC calculations.

Needed to preserve long-run GNI per

capita growth

Productivity Commission 4

Productivity in different sectors1989-90 to 2012-13, index 1989-90=100

Manufacturing

Financial and insurance services

Utilities

Mining

50

100

150

200

1989-90 1993-94 1997-98 2001-02 2005-06 2009-10

Labour productivity

MFP

Capital productivity

50

100

150

200

1989-90 1993-94 1997-98 2001-02 2005-06 2009-10

Labour productivity

MFP

Capital productivity

50

100

150

200

1989-90 1993-94 1997-98 2001-02 2005-06 2009-10

Labour productivity

MFP

Capital productivity

Source: ABS (Estimates of Industry Multifactor Productivity, 2012-13, Dec 2013).

50

100

150

200

250

1989-90 1993-94 1997-98 2001-02 2005-06 2009-10

Labour productivity

MFP

Capital productivity

Productivity Commission 5

Multifactor productivity growthin selected countries and regionsAverage annual growth rates, per cent

Data source: The Conference Board Total Economy Database™, January 2014.

1997-2006 2007-2011 2012 2013

World 1.0 0.6 0.2 -0.1

France 0.6 -0.7 -0.7 -0.5Germany 1.0 0.1 -0.3 -0.5

Ireland 1.4 -1.0 -0.7 0.1Norway 0.0 -2.6 0.1 0.1

Sweden 1.6 -0.7 -0.3 0.2United Kingdom 0.6 -0.9 -2.0 -0.1

Europe 0.6 -0.5 -0.7 -0.5

Canada 0.2 -0.9 -1.0 -1.1United States 0.8 0.1 0.7 0.4

Australia 0.2 -1.2 -1.3 -1.3

New Zealand 0.1 -0.8 2.4 -1.2

China 2.8 3.1 0.6 0.0India 1.6 2.7 -0.4 -1.2

Japan 0.2 0.0 1.1 0.7Singapore 1.5 -0.1 -3.4 0.0

South Korea 2.0 2.7 0.2 0.4

Productivity Commission 6

Productivity Commission 7

Labour productivity and real wages: Australia and G20

Productivity Commission 8

Ageing will reduce economy wide participation rates

59

61

63

65

67

691979-80 to 2012-13

Rates with no ageing

Projected participationrates

2013-14 to 2059-60

Productivity Commission 9

Current expenditures are weighted towards older Australians

0-4

5-9 1 1 2 2 3 3 4 4 5 5 6 6 7 7 8 8 9 9

0

20

40

60

80

Health

Age Pension

Other

Aged care

Education

Productivity Commission 10

Mismatch between life expectancy and retirement policy

People are living longer, but not increasing the time spent in the workforce

Oldest Gen (1901-1925)

Silent Gen 1926-1945

Baby Boomers

1946-1965

Gen X&Y 1966-1985

iGeneration 1986-2005

GenWhats 2006-2060

0

20

40

60

80

100

43.2 42.6 43.8 44.4 44.9 45.4

13.2 20.0 23.9 27.7 30.7 32.6

Lif

e e

xp

ec

tan

cy

aft

er

15

(y

ea

rs)

Average years in labour forceAverage years outside labour force

56.4 62.467.7 72.2 75.6 77.9

Rounding errors means numbers may not exactly sum

Productivity Commission 11

Growth of the oldest old is set to soar

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

2036

2037

2038

2039

2040

2041

2042

2043

2044

2045

2046

2047

2048

2049

2050

2051

2052

2053

2054

2055

2056

2057

2058

2059

2060

0

2

4

6

8

An

nu

al p

op

ula

tio

n g

row

th

(%)

85+

All ages

75+