Why Is It Important To Determine Australia's Productivity?

The mineral heavy economy is facing serious drop in its productivity. The last decade of 20th century showed a surge in Australian productivity placing Australia at second position among OECD countries. The surge was backed by industries and mining boom. After a successful decade of promising productivity growth with an MPF rate of 2.3% the country became economically strong. But by 2003-04 the productivity went low than predicted by RBA into negative figures. When we do a surface level research to find out the factors which resulted in this productivity reduction we can find that the main culprit is manufacturing and mining (Pharam,2012). But when we go deep into the subject we can see that the mining industry is not only the reason. There are complex economic problems and policies which resulted in productivity slowdown.

Then why productivity is important why we should be concerned about productivity drop. Productivity determines the living standard of the people of the country. Since the productivity was in a growing track for decades the country became prosperous and citizens enjoy better standard of living than the past generations. Productivity helps to measure how much output we get from given quantity of input, which is efficiency of the economy to produce goods and services. The various inputs include human capital, physical capital, natural resources and technological knowledge etc. Productivity growth is the main factor which determines the gross domestic product of a country. Productivity also determines factors such as recovery from an economic recession, long term challenges which include aging and climate change.

Productivity is not everything, but in the long run it is almost everything (krugman,