Productivity Commission Paula Barnes Productivity Analysis Branch Productivity Commission PC-ABS Productivity Perspectives Conference, Canberra 20 November 2012 Productivity in Australian Manufacturing: Some preliminary results
Productivity Commission
Paula Barnes
Productivity Analysis Branch
Productivity Commission
PC-ABS Productivity Perspectives Conference, Canberra 20 November 2012
Productivity in
Australian Manufacturing: Some preliminary results
Productivity Commission 2
MFP for manufacturing and the market sector
Data source: ABS (Cat. no. 5260.055.002, 2010-11)
60
70
80
90
100
110
120
1985-86 1988-89 1991-92 1994-95 1997-98 2000-01 2003-04 2006-07 2009-10
MFP Manufacturing
MFP Market sector (12 industries)
Index 2009-10 = 100
Productivity Commission 3
MFP for manufacturing and the market sector over cycles
Data source: ABS (Cat. no. 5260.055.002, 2010-11)
60
70
80
90
100
110
120
1988-89 1993-94 1998-99 2003-04 2007-08 2010-11
Mfg 0.0 Mkt 0.9
Mfg 0.6 Mkt 2.5
Mfg 1.3 Mkt 1.2
Mfg -1.4 Mkt 0.0
MFP Manufacturing
MFP Market sector (12 industries)
Av. annual growth
Incomplete cycle
Mfg -0.8 Mkt -1.0
Cycle 1 Cycle 2 Cycle 3 Cycle 4
Index 2009-10 = 100
Productivity Commission 4
Large decline in Manufacturing MFP growth between the last 2 complete cycles
Data source: ABS (Cat. no. 5260.055.002, 2010-11)
-3.0-2.5-2.0-1.5-1.0-0.50.00.51.01.52.0
1998-99 to 2003-04 2003-04 to 2007-08 difference between cycles
Manufacturing MFP growth (average annual % growth by productivity cycle)
Cycle 3 Cycle 4
1.3
-1.4
-2.7
Productivity Commission 5
Less negative MFP growth in the incomplete period
Data source: ABS (Cat. no. 5260.055.002, 2010-11)
-3.0-2.5-2.0-1.5-1.0-0.50.00.51.01.52.0
2003-04 to 2007-08 2007-08 to 2010-11 difference between periods
Manufacturing MFP growth (average annual % growth by productivity cycle)
Cycle 4 Incomplete cycle
-1.4 -0.8
0.6
Productivity Commission 6
What does negative MFP growth mean?
• Technological regress?
• Compositional effects?
• New impediments; new standards?
• Producers making poor decisions?
• Adjustment?
• Measurement issues?
Productivity Commission 7
Approach to analysis
• Aggregate manufacturing − Proximate causes of MFP growth
(growth in VA, K, L)
• Subsectors within manufacturing − Main contributors to aggregate decline − Proximate causes of MFP growth − Possible influences on the main
contributors
Productivity Commission 8
Proximate causes of the MFP growth decline in manufacturing
Data source: ABS (Cat. no. 5260.055.002, 2010-11)
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
1998-99 to 2003-04 2003-04 to 2007-08 Difference between thecycles
Value added growth Weighted hours worked growthWeighted capital services growth MFP growth
Cycle 3 Cycle 4
Growth in VA, inputs and MFP (average annual % growth by productivity cycle)
Productivity Commission 9
Subsector MFP estimates
• Manufacturing divided into 8 subsectors (still diverse in activities) • Food, beverage & tobacco products (FBT) • Textile, clothing & other mfg (TCO) • Wood & paper products (WP) • Printing & recorded media (PRM) • Petroleum, coal, chemical & rubber products (PCCR) • Non-metallic mineral products (NM) • Metal products (MP) • Machinery & equipment mfg (ME)
• Data and methodological limitations
Productivity Commission 10
… how does MFP growth vary across subsectors?
-6.0 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0
Food, beverage & tobacco products (FBT)
Petroleum, coal, chemical & rubber products (PCCR)
Printing & recorded media (PRM)
Textile, clothing & other manufacturing (TCO)
Wood & paper products (WP)
Metal products (MP)
Machinery & equipment manufacturing (ME)
Non-metallic mineral products (NM)
Total manufacturing - ABS
Cycle 3: 1998-99 to 2003-04 Cycle 4: 2003-04 to 2007-08
% per year
Data source: Authors’ subsector estimates (preliminary); Total manufacturing ABS (Cat. no. 5260.055.002, 2010-11)
Productivity Commission 11
Change in subsector MFP growth between cycles 3 and 4
-9.3
-4.7
-4.1
-3.7
-2.7
-2.3
-1.8
-1.4
-0.1
-10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0
Printing & recorded media
Petroleum, coal, chemical & rubber products
Textile, clothing & other manufacturing
Food, beverage & tobacco products
Total manufacturing (ABS)
Metal products
Machinery & equipment manufacturing
Non-metallic mineral products
Wood & paper products
Change in average annual % growth
Data source: Authors’ subsector estimates (preliminary); Total manufacturing ABS (Cat. no. 5260.055.002, 2010-11)
Productivity Commission 12
Manufacturing subsector sizes (Shares of gross value added at basic prices 2009-10)
Data source: ABS (5204.0, 2010-11)
Food, beverage and tobacco products
22%
Metal products 20%
Machinery and equipment 18%
Petroleum, coal, chemical and rubber
products 17%
Wood and paper products 7%
Textile, clothing and other manufacturing
7%
Non-metallic mineral products 5%
Printing and recorded media 4%
Productivity Commission 13
Subsector contributions to the decline in mfg MFP growth between the cycles 3 and 4
Data source: Authors’ estimates (preliminary)
-0.81
-0.73
-0.42
-0.40
-0.35
-0.32
-0.07
0.0
-1 -0.8 -0.6 -0.4 -0.2 0 0.2
Petroleum, coal, chemical & rubber products
Food, beverage & tobacco products
Metal products
Textile, clothing & other manufacturing
Printing & recorded media
Machinery & equipment manufacturing
Non-metallic mineral products
Wood & paper products
Percentage point change in contribution
Productivity Commission 14
Differing contributions to the proximate causes of the aggregate MFP decline
Data source: Authors’ estimates (preliminary)
-1.5
-1.0
-0.5
0.0
0.5
1.0
FBT PCCR MP Rest of Manufacturing(5 Subsectors)Value added Labour Capital MFP
Contributions to change in growth in aggregate manufacturing output, inputs and MFP between cycle 3 and cycle 4 (percentage points)
Productivity Commission 15
Metal products (MP)
Data source: Authors’ estimates (preliminary) based on ABS data
-5
-4
-3
-2
-1
0
1
2
3
4
5
1998-99 to 2003-04 2003-04 to 2007-08 Difference between the cycles
value added growth weighted hours worked growthweighted capital services growth MFP growth
% per year
Cycle 3 Cycle 4
Productivity Commission 16
Food, beverages and tobacco products (FBT)
Data source: Authors’ estimates (preliminary) based on ABS data
-5
-4
-3
-2
-1
0
1
2
3
4
5
1998-99 to 2003-04 2003-04 to 2007-08 Difference between the cycles
value added growth weighted hours worked growthweighted capital services growth MFP growth
% per year
Cycle 3 Cycle 4
Productivity Commission 17
Petroleum, coal, chemicals, and rubber products (PCCR)
Data source: Authors’ estimates (preliminary) based on ABS data
-5
-4
-3
-2
-1
0
1
2
3
4
5
1998-99 to 2003-04 2003-04 to 2007-08 Difference between the cyclesvalue added growth weighted hours worked growthweighted capital services growth MFP growth
% per year
Cycle 3 Cycle 4
Productivity Commission 18
• Less value adding − Declining domestic feedstock − Trend in importing refined fuel − Underutilised capacity
• Significant investment due to Cleaner
Fuels Program − Higher quality fuels not fully reflected in
productivity measures
Influences on PCCR – Petroleum
Productivity Commission 19
• Diverse subdivision − Including plastics, paints, foam rubber,
adhesives and tyres
• Mixed influences − Greater import competition in plastics and
tyres − Increased demand from construction
‘boom’
Influences on PCCR – Polymers and rubber
Productivity Commission 20
• Very diverse subdivision − Industrial gases, fertilisers,
pharmaceuticals, cosmetics and cleaners (to name a few)
• Agricultural and mining related products
− Strong demand growth − Investment to expand capacity, but slow
response in output – long lead times
Influences on PCCR – Chemicals
Productivity Commission 21
• Pharmaceutical products − Strong output growth and very strong
export growth − Between the productivity cycles, a
decline in investment and employment − Substantial increase in R&D
expenditure
Influences on PCCR – Chemicals (cont’d)
Productivity Commission 22
Three main subsectors have differing proximate causes of MFP decline
Data source: Authors’ estimates (preliminary)
-1.0
-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
FBT PCCR MP
Value added Labour Capital MFP
Contributions to change in growth in aggregate manufacturing output, inputs and MFP between cycle 3 and cycle 4 (percentage points)