Why is Australia’s labour productivity falling if people are working more hours?

While the total number of hours worked in Australia rose a robust 2.2% year-on-year, the aggregate value of the goods and services produced failed to keep pace.

How does Australia's current productivity compare to the pandemic era?

National productivity has become structurally stuck and sits 0.1% below the levels recorded in March 2023. March 2023 marked the period when the pandemic-era productivity bubble officially burst.

Which sectors of the Australian economy saw the largest productivity declines?

The downturn was led by the market sector, where quarterly labour productivity dropped 0.7% and annual growth stalled entirely at 0.4%. The non-market sector also experienced a decline, dipping 0.3% over the March quarter and 0.1% for the full year.

Why is infrastructure investment in the electricity industry hurting measured productivity?

Substantial infrastructure investment over the past 20 years to replace coal assets with new energy infrastructure has created a temporary production lag. Because these new energy assets take time to become fully operational and efficient, they temporarily weigh down measured productivity.

What does the March quarter productivity slump mean for retail investors?

A combination of falling productivity and weak 0.3% GDP growth signals a stagflationary risk that could squeeze corporate profit margins, as businesses pay for more hours worked without gaining extra output. This macro environment typically makes cyclical stocks more vulnerable.

Economy

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Australia's productivity slump threatens economic growth

Q: What happened to Australian labour productivity in the March quarter?

Australian labour productivity fell by 0.6% during the March quarter, according to data from the Australian Bureau of Statistics and the Productivity Commission. This drop occurred alongside a sluggish quarterly GDP growth rate of just 0.3%.

Written by Brie CarterPublished Jun 11, 2026, 9:57 PM

Australia's economic engine is stalling as labour productivity slipped by 0.6% in the March quarter, according to the latest figures from the Australian Bureau of Statistics and the Productivity Commission.

The decline comes alongside sluggish quarterly GDP growth of just 0.3%, sparking serious concerns about the nation's economic trajectory.

Productivity Commission Deputy Chair Alex Robson warned that national productivity appears structurally stuck, currently sitting 0.1% below March 2023 levels—the period marking the end of the pandemic-era productivity bubble.

The downturn was led by the market sector, where quarterly labour productivity fell 0.7% and annual growth ground to a halt at 0.4%.

The non-market sector also dipped 0.3% over the quarter.

The Productivity Commission’s latest quarterly bulletin highlighted a growing disconnect between workforce effort and economic output.

While growth in hours worked remains robust—rising 2.2% year-on-year—the aggregate value of goods and services produced has failed to keep pace.

"In aggregate, we are working harder and longer, but we are not working smarter," Robson said. "Australia’s labour productivity growth is going from bad to worse."

The bulletin zeroed in on the electricity industry, noting that a productive economy relies heavily on affordable, reliable energy.

Robson highlighted that significant infrastructure investment over the past twenty years to replace coal assets has temporarily weighed down measured productivity due to the standard production lag of new energy assets.