Question

Identify and discuss the factors determining the rate of productivity growth in Australia.

Answer 1

Given the existence of information, the benefits of its production to society, e.g. through research and development or education, that outweigh the benefits gained by the organization or person that actually produces it. Consequently , information output can be less than optimal if left entirely to market forces. So governments may have a role to play in subsidizing investment in R&D, education, and training

Some of the key factors that are likely to impact productivity growth include the degree to which a country has room for implementing best-practice technology from other countries, the level of investment in some forms of physical capital, the amount of resources devoted to research and development, the level of human capital

Australia's spending in physical infrastructure over the last three decades has continued to go beyond average. This, however, represents in part our higher than average rate of population growth and our relatively low level of resource productivity. As regards its impact on profitability, the form of investment spending seems to be significant as the aggregate level.

Microeconomic reform is a way of reforming Australia's economic institutions. This aims to reduce unnecessary trade restriction and enable resource allocation in the Australian economy to better represent market outcome.