Before you get too panic-stricken about Australia's poor productivity record, consider this: maybe it's a good sign. If you've been given the impression productivity can be weak only for bad reasons, you've been misled. Productivity - output per unit of input - is only what you could call a key performance indicator; a means to an end, not an end in itself.
The end is the material well being of the Australian people. And there are plenty of things that improve our well-being (or ''welfare'' as economists call it) while worsening measured productivity.
This is an uncontroversial point among economists and has been acknowledged by the leading protagonists in the productivity debate, the secretary to the Treasury, Dr Martin Parkinson, and Saul Eslake of the Grattan Institute. But you have to read their fine print to find that acknowledgement.
The productivity of labour in the mining industry has declined by about 40 per cent since 2001-02, but that's mainly because much work is being done on the installation of additional production capacity, without that additional capacity yet coming on line and adding to output. When eventually it does, the industry's productivity will be much improved.
Another factor affecting mining is that the exceptionally high prices we're receiving for our minerals have prompted firms to mine lower-grade or harder-to-get-at ore. Is it a bad thing it's now economic to mine and sell second-grade minerals? Hardly - well, not from our standard materialist viewpoint.
Labour productivity has dropped by about a third in our utilities sector (electricity, gas and water). Electricity and gas businesses are investing heavily to expand their production capacity, replace ageing transmission infrastructure and meet renewable energy targets.
Similarly, governments have undertaken significant investment in water infrastructure - including desalination plants in five states - to guarantee security of supply during droughts.
Once again, none of these developments is bad, notwithstanding their adverse effect on measured productivity. The experts disagree on how much of the overall deterioration in productivity is accounted for by mining and utilities. Some say a lot of it.
But another factor contributing to our poor productivity performance is that, with an unemployment rate of 5 per cent or so for more than a year, we're close to full employment. This means firms are having to employ people who wouldn't be their first pick for the job, thereby lowering the average productivity of their workforce.
Is this a bad thing? On the contrary, it's wonderful the economy is in a position to provide work for these people. This, after all, is one of the main things we want from our economy: that it generate jobs for all those who want them.
It's possible something similar is happening to the productivity of our capital equipment. Some firms may be using whatever old or second-rate machines they can get their hands on so as to keep up with demand. Again, not such a bad thing.
I wrote some weeks ago that the big microeconomic reform push of the 1980s and '90s proved disappointing in its effect on productivity. It produced a once-off lift in the level of our productivity, but failed to achieve the lasting increase in our rate of productivity improvement.
But there was a different respect in which micro reform yielded a quite unexpected benefit: it made the economy a lot more flexible and resilient in response to economic shocks. By increasing the degree of competition in many markets, it reduced firms' pricing power (and hence their unions' bargaining power), thus making the economy significantly less inflation-prone.
In consequence, the macro economy became much easier to manage. Combine that with the authorities' adoption of more disciplined frameworks for the conduct of monetary and fiscal policies, and you probably have much of the explanation for our record of 20 years without a severe recession.
Is that a good thing? Of course it is. It's a remarkable achievement. But in economics everything has an opportunity cost and even good things have their drawbacks. It's highly likely the drawback of going for so long without a serious recession is an ever-weakening productivity performance.
As Dr Diane Coyle wrote in her book, The Economics of Enough, ''a recession is a period of faster industrial restructuring rather than simply an economy-wide reaction to a common shock''.
When times are good - and, despite our recent complaints, times have been very good for most of our businesses for many years - firms aren't under a lot of pressure to improve their performance. It often takes adversity to oblige firms to try harder and lift their game. Inefficiencies and unsuccessful projects can be overlooked when times are good. They tend to accumulate. But when times get tough there's a lot of spring cleaning.
So, as Coyle implies, structural change tends to occur in bunches at the time of recessions, rather than continuously as textbooks assume.
Of course, this process of ''creative destruction'' during recessions can be very painful, involving a lot of workers losing their jobs.
As a case in point, it's likely the adjustment being imposed on our manufacturers by the high dollar will leave productivity a lot higher in what's left of manufacturing. Many firms will really have to improve their performance if they're to survive.
So, not to worry. Sooner or later the economy will face another severe recession - the business cycle is far from dead - and once it has done its worst and we're into the recovery phase our productivity figures are likely to look much better.
