The AFR has picked up on a US BLS report comparing nation’s manufacturing productivity to slam Australian factory efficiency:
Australia is the least efficient manufacturing nation in the developed world, the US Bureau of Labour Statistics reports.
Manufacturing productivity fell 4 per cent last year, placing Australia last among 19 nations.
We were close behind Japan, where productivity declined by just under 3 per cent. Italy was the only other nation of the 19 advanced nations surveyed to report a fall in manufacturing productivity last year.
Seven nations – including the US, Singapore, Japan and Taiwan – surged more than 10 per cent as the global economy recovered from the financial crisis.
The data measures output in national currencies per hour worked, largely eliminating exchange rate effects.
Well, yes, it does, but that’s not all it measures. Here are the charts supporting the AFR’s view:
No doubt about it, Australia has had too much wage growth for too long to support competitive manufacturing (or mining!). But the report also has some nice data on the interest rate effects, which does not seem to fit the AFR’s agenda. First, unit labour costs in AUD:
Again, good growth and a loss of competitiveness against, for example, Germany. Now the same data in US dollars:
Hmmm…I’m not arguing that manufacturing couldn’t be more efficient, nor that Australia doesn’t have wages growth that is unsustainable. What I am arguing is that the currency has had an enormous impact in the last decade, that addressing it would have FAR greater and more swift impacts than internal devaluation, and that the AFR is biased for neglecting to mention it.
Full report below. Chart spreadsheets are available here.
