25 Mar 2010

Rising income 'more important than productivity'

6:44 am on 25 March 2010

Australian Productivity Commission chairman Gary Banks says a fall in Australian productivity in the last few years is not too concerning, given per capital income has risen.

Speaking at a Statistics New Zealand conference on Wednesday, Mr Banks noted Australia's productivity has been on a roller coaster ride in the last couple of decades.

He says multi-factor productivity jumped 2.1% a year between 1993 and 1999, easing back to 1.1% between 1999 and 2003, before contracting 0.2% between 2004 and 2008.

But Mr Bank says the decline reflected the effects of drought, and the hectic growth of the mining sector in the face of strong demand from China.

This means more will be produced, at a higher cost but also bigger profits - resulting in an apparent anomaly of productivity falling but per capital income rising faster than it has for years because of the improvement in the terms of trade.

"Productivity is important but it's a means to an end, and at the end of the day we want higher incomes per capita," he says.

Mr Banks says Australia's Productivity Commission has been complementary in improving the country's statistical database, as it's a heavy user of data.

He says that should happen here when New Zealand's Productivity Commission is up and running next year, as good evidence is needed to make good public policy decisions.