The pandemic pumped up productivity. Then the bubble burst

However, the pandemic didn’t necessarily shift our career motivations. As the Productivity Commission’s deputy chair Alex Robson said in the most recent productivity bulletin, a lot of the job-switching was due to lockdowns and restrictions.

Mining and information technology tend to be more productive. That’s because of the heavy amount of machinery, equipment and infrastructure in these sectors. These investments can lead to big innovations, such as automation, and help firms to produce things on a larger scale.As workers temporarily shuffled into these higher productivity sectors, overall labour productivity spiked to an all-time high. Then, the bubble burst.

The problem with stagnant or lower productivity is that wage growth can start to feed into inflation, and vice versa. It’s called the wage-price spiral because we can end up trapped in a seemingly endless cycle. Now that the rollercoaster of pandemic productivity has smoothed out, we need to focus on boosting productivity.

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