RBA warns that low productivity endangers living standards

Published 28 November 2013, 7:34 AEST

The Federal Reserve Bank of Australia warned that the investment boom brought about by the Australian mining industry is slowly fading. If Australia cannot dramatically increase productivity, then people's living standards will be affected.

The Reserve Bank of Australia warns that low productivity endangers living standards (Credit: AAP)

The bank’s deputy governor, Roy, said in a speech in Sydney on Tuesday that in the past decade, despite the slow growth of Australia’s overall economic output, average household income has risen sharply. He said that the reason for this result is that Australia's trade has increased significantly during this period.

Lowe said that the rapid growth in Asia has pushed up the price of mineral products, and therefore, the export price of Australian mineral products has risen sharply. He said that this is an increase in the value of work per hour, not an increase in output per hour. This is the main reason for the improvement in living standards in Australia in the past decade.

Dr. Lowe said that another factor contributing to this trend is that Australia has historically had a high proportion of the working-age population.

However, Roy warned that these favorable conditions are unlikely to last.

He said that recently, although the output per hour of work in Australia has increased, the decline in trade and the slowdown in the growth of output per hour have dragged down the increase in Australian per capita income. He said Australia needs to increase productivity because Australia can no longer rely on trade growth.