Industry Insights:
3/2018 Future productivity

Future Productivity is the third edition of Industry Insights.

Chapter 1 examines recent productivity performance, taking a new perspective by exploring the link between productivity and how quickly the economy is changing.

Chapter 2 takes stock on digital technology use in Australia, and has a closer look at how the specific digital technologies are affecting critical industries in Australia

Chapter 3 explores the impact of management capability on the productivity of Australian firms.

This chapter explores a possible explanation for low productivity growth — the slower pace of change in the economy.

Since 2004, productivity growth in Australia and advanced economies has been declining.

Typical explanations include fewer economic reforms and the impact of the mining boom. The slower pace of change for businesses, workers and innovation is another possible driver.

The entry and exit of business has been declining in Australia, the US and Canada over the past decade. The rate of occupations disappearing and new ones rising in their place has also been falling in both Australia and the US. Globally, the productivity gap between firms at the technological frontier and non-frontier firms has widened.

This chapter looks into the adoption of digital technology in Australia and how select digital technologies are affecting critical industries in Australia. Digital technologies are an opportunity to boost productivity, and could boost the economy by $140–250 billion by 2025.

But digital technology adoption varies widely across industries — finance firms use cloud computing at three times the rate of agriculture. Australia’s competitive advantage in mining is supported by Australian miners being at the frontier of digital adoption — continuing to lead the pack is critical to maintaining Australia’s competitive advantage.

This chapter delves into an Australian-first survey of management practices and analyses how management capability affects productivity.

Productivity is often described as the way labour and capital are used together in production. Managers, and their capabilities, sit at the heart of productivity.

Strategic management has a strong association with labour productivity. The best managed firms are 20 per cent more productive than those with the least structured management practices. Better managed firms innovate and collaborate more frequently.

International comparisons and managers’ systematic overestimation of their capabilities suggest that Australian firms have substantial scope for improvement in their management practices.

This chapter is complemented by the staff research paper ‘Strategic management in Australian firms’.