The Australian Multi-Factor Productivity Growth Illusion

Over the past decade, Australian multi-factor productivity growth has been predominantly negative, often leading to the view that there is a ‘productivity problem’. It is shown that it is not a useful measure and is thus misleading. Exploratory econometric investigations suggest that economies of scale are the primary drivers of productivity growth. However, more research needs to be undertaken to understand the determinants of these economies of scale before any new policy to promote productivity growth is designed. There needs to be greater understanding of the underlying process of innovation that gives rise to economies of both scale and scope