Australians are working more hours than ever before just to keep up with soaring living costs but their output is not keeping pace, analysis by the Productivity Commission has found.
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Highlighting the scale of the nation's productivity challenge, the commission reported a 2.4 per cent jump in hours worked across the economy in the June quarter - the biggest such increase on record - with almost 90 per cent of the increase coming from existing employees.
Workers in education, construction, manufacturing and professional and technical services accumulated the biggest share of increase in work hours, accounting for more than 40 per cent of the total lift.
Despite the extra activity, output climbed just 0.4 per cent, resulting in a 2 per cent slump in productivity for the quarter, acting Productivity Commission chair Alex Robson said.
![Despite working harder, employees are struggling to advance. Picture Shutterstock Despite working harder, employees are struggling to advance. Picture Shutterstock](/images/transform/v1/crop/frm/pMXRnDj3SUU44AkPpn97sC/af053e8c-21ca-4c5b-8561-e6f53cbd0595.jpg/r0_0_6000_3387_w1200_h678_fmax.jpg)
"Australians worked more in the June quarter as cost-of-living pressures continue to bite. But even though hours worked rose, the rise in output was more modest, and that shows up as a reduction in labour productivity," Mr Robson said.
"Negative productive growth means that on average, Australians worked more hours just to produce and buy the same amount of goods and services. In other words, Australians have been running to stand still."
The commission said the recent surge in work hours might be a short-lived trend that moderates as the economy slows and demand for labour eases. The current huge migrant influx may also help ameliorate worker shortages.
But Mr Robson warned that even if the number of hours people are working does moderate, that by itself will not be enough to resuscitate the country's poor productivity performance.
After growing by an annual average above 2 per cent during the 1990s, productivity growth slowed to around 1 per cent during the 2010s and has slumped since the pandemic.
The Productivity Commission predicts a 3.2 per cent fall in the annual rate between 2021-22 and 2022-23, representing a major drag on living standards.
Productivity refers to how much can be produced with a given set of inputs. It improves when the same amount can be produced with fewer inputs or more can be produced with the same inputs. Lifting productivity is seen as fundamental to sustainably increasing living standards.
According to the commission's analysis, labour productivity fell in 15 out of 19 industries in the June quarter.
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Three industries in particular, mining, utilities and IT, accounted for almost half of the overall decline in labour productivity. Mining alone was responsible for a third of the fall because there was a large decline in output despite an increase in work hours.
Mr Robson said the findings showed that fluctuating work hours was not going to provide the solution to the nation's productivity problem.
"Our productivity challenge has been urgent for many years. We will only see sustainable, long-term productivity growth if we increase investment and innovation," Dr Robson said.
In an inquiry into the nation's productivity performance, the commission called for a major shakeup of the education system to improve the teaching and development of foundational skills, boost teacher skills and foster lifelong learning.
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