From The Pascometer today:
…speeches by RBA heavyweights are worth reading in full…by reading the source document, you also don’t miss out on the good news that tends not to attract eyeballs the way bad news does.
A particular case in the Hobart speech was Stevens recording the very pleasing lift we’re witnessing in labour productivity. Much of the more doctrinaire commentary around the place, especially from the right and business groups, is well out of date on productivity.
As the accompanying graph from Stevens’ speech shows, the nation’s labour productivity has lifted nicely, back up to 2 per cent per annum overall.
The mining industry is leading that charge but the anecdotal evidence is that non-mining workplaces are catching up.
True enough, however, productivity ain’t productivity. Here a recent chart from Stephen Walters at JPM that shows the problem:
It’s multi-factor productivity (MFP) that matters. It includes capital as well as labour (and other stuff) and if it’s falling even as labour efficiency rises then that implies serious mal-investment in the economy is preventing improved per unit labour output from delivering a lift in competitiveness and standards of living.
The MFP trend is up but it’s a long way short of 2% at -1%. Will it improve? It should as investment turns to production in mining and given the incipient infrastructure construction agenda.
But, given the incredible duplication around investment in utilities and carbon mitigation, the total lack of process around infrastructure project selection, the decline of manufacturing investment, the widespread rent-seeking in service sectors and the land price boom, one could be forgiven for having grave doubts.
And, of course, The Pascometer is signalling an imminent top!
