BEHIND THE DETERIORATION OF PRODUCTIVITY GROWTH Productivity measures the “efficiency” of an economy's production. There are two common measures of productivity: labor/capital productivity and multifactor productivity (MFP). However, MFP is a better indicator because it measures the quantity of output using both labor and capital. Therefore, it also reflects improving technology and provides economists with a broader view of how an economy is developing. Productivity growth is a primary source of income growth. Improving economy-wide productivity increases output per input, which means higher income. This allows families to increase consumption which raises living standards. At the sectoral level, productivity growth encourages industry to compete with others and maintain international competitiveness. This is particularly important for Australia, whose economic growth depends largely on exported products, primarily to the East Asian market (Department of Foreign Affairs and Trade 2011). However, since the mid-2000s, Australian productivity growth has shown signs of slowing significantly relative to Australia. strong growth in the 1990s (Figure 1): Figure 1. Multi-factor productivity across Australian market sectors Source: ABSMFP growth has varied significantly over these periods. According to the ABS report, the period from 1974-75 to 2003-04 has already been a complete cycle with an average productivity of 1.1%. Therefore, some economists believe that the decline in productivity growth is far from typical. When MFP reaches a negative growth rate (-0.4% in 2008-2009), economists once again begin to question the economy's output and look for solutions to increase the productivity growth rate. Many reasons have been given to explain the crisis... middle of paper... the Americas and the European Union: 2010. August 17, 2011Lawrence Consulting. Assessing the economic impact of ex-tropical cyclone Oswald on the Bundaberg and North Burnett regions. http://www.businessbundaberg.com.au/resources/site1/general/economic%20impact%20of%20ex%20tropical%20cyclone%20oswald%20january%202013%20final.pdf (accessed 15 July 2014) Parham, Dean. The Australian Economic Review, vol. 46, n.4. The University of Melbourne, December 2013Parliament of the Commonwealth of Australia. Inquiry into the rising rate of productivity growth in the Australian economy. April 2010, CanberraPC, Productivity Commission. Understanding productivity in the mining sector: measurement and interpretation. 10 December 2008Syed, Arif and Grafton, Quentin and Kalirajan, Kaliappa. Productivity in the Australian mining sector. Canberra: Bureau of Energy Resources and Economics, 2013