Economic Output and Productivity Performance of the Australian States Presentation to Productivity Perspectives Workshop ‘07 Presenter: Gudrun Meyer-Boehm The research has been undertaken by Jim Hurley, Trinh Le, Sid Shanks, Mark Upcher of the Office of Economic and Statistical Research, Qld Treasury and their assistance is greatly appreciated. The content of this presentation should not be taken as necessarily reflecting their views and opinions.

GSP and GSI per head of population Importance of the industry structure Decomposition of GSI per capita growth Importance of labour productivity S/T Net Capital Stock and Capital Services estimates Decomposition of Labour Productivity Capital Deepening and MFP Overview

Real GSP per head of population, States, to NSWVicQldSAWATasAUS Average Annual Growth Rates

Real GSP per head of population relative to the Rest of Australia, to

Real GSI per head of population relative to the Rest of Australia, to

Average annual growth rates, per cent, to NSWVicQldSAWAAus Labour productivity Labour utilisation Employment0.5 Participation Intensity Real GDP/GSP per capita Terms of trade Real GDI/GSI per capita

Contribution to GDI/GSI growth per head, per cent, to NSWVicQldSAWAAus Labour productivity Labour utilisation Employment Participation Intensity Real GDP/GSP per capita Terms of trade Real GDI/GSI per capita100

Labour Productivity to NSWVicQldSAWATasAus Average Annual Growth Rates

Labour Productivity, Capital Deepening and MFP Labour productivity growth Capital deepening Multifactor productivity S/T capital stock data Net capital stock estimates Capital services estimates S/T multifactor productivity data

State and Territory net capital stock estimates Research extends previous work by (Mikhailitchenko, Nguyen and Smith, 2005) Perpetual Inventory Method accumulates State Gross Fixed Capital Formation (GFCF) by asset type Allocation of national net capital stock to the states

“Capital services” for States and Territories Net capital stock Productive capital stock “Capital services” constructed by scaling-up net capital stock growth rates to align with Australian market sector growth rates by asset type Scaling Factors - ratio between the Australian capital service index and the Australian net capital stock index.

Capital services and Net Capital stock, Australian market sector, to

Capital Stock and Services Growth, average annual growth, to StateNet Capital StockCapital Services NSW Vic Qld SA WA Tas AUS2.93.8

State Multifactor Productivity, average annual growth State84-85 to (%) to (%) to (%) NSW Vic Qld SA WA Tas

Decomposition of Labour Productivity, average annual growth, to

Conclusions Labour productivity key driver of output and income growth ToT effect beneficial for all States, although different magnitude Industry structure appears important Updated net capital stock estimates Capital service method looks promising for construction of improved state and territory productivity estimates Contribution of MFP to LP growth has been strong for most States, in particular since Magnitude of MFP and capital deepening contributions to LP growth varies across States.

Further work Further testing of capital methods Treatment of land and inventories, Quality of labour adjustment Can GSP(P) data be exploited to improve estimates Better measurement of non-market sector