A recovery productivity growth may ease upward pressure on unit costs and inflation, the Reserve Bank of Australia said in its latest quarterly bulletin, released Thursday.
It will also allow stronger growth in real incomes, the central bank said.
The trend rate of multifactor productivity growth in the Australian economy declined in the latter part of the 2000s following rapid growth in the 1990s.
"Although it is not possible to gauge the extent of changes in trend productivity growth from a few quarters of data, there are signs that productivity growth has picked up over the past year," the RBA noted in the report.
The weakness in productivity growth outside of the mining industry has affected the domestic economy in part through higher non-tradables prices.
According to the central bank, with the terms of trade likely to ease over the next few years, real income growth will slow unless there is a pick-up in productivity growth.
"For inflation to remain consistent with the Bank's target this will also imply a slowing in the pace of growth in nominal factor incomes," the bank said.
by RTT Staff Writer
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