Productivity growth ‘mediocre’ as businesses cut R&D and innovation spending

The commission said it appeared some of the weakness was directly attributable to a slowdown in capital investment by the nation’s businesses. Capital input use lifted by 1.9 per cent in 2017-18, compared to the long-term average of 4 per cent.

Saying that this “engine of growth” had faltered, the commission found the drop-off in capital spending was broad and not just confined to a particular sector such as mining.

“The current weakness in labour productivity can be partly attributed to a marked slowdown in
investment in capital – so much so that the ratio of capital to labour has fallen – ‘capital
shallowing’,” it found.

“This is troubling because investment typically embody new technologies, which complement people’s skill development and innovation. This is especially so for investment in research and development, where capital stocks are now falling, and even more so, new investment.