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New report suggests mining boom has hidden concerning drop in capital productivity

A new report has suggested australia may be too dependant on the mining boom 16000646 800484604 0 0 14051043 300

Australia's recent economic success may be hiding a deeper problem with capital productivity, according to a new report from the McKinsey Global Institute entitled Beyond the boom: Australia’s productivity imperative.

According to the study, 58 per cent of the country's income growth since 2005 has been driven solely by temporary factors such as the resource boom.

However that resource boom has also been the main contributor to a 0.7 per cent decline in productivity between 2005 and 2011.

Essentially that means that if the boom were to slow or halt completely, it could have massively detrimental effects to the Australian economy, with income growth potentially dropping to 0.5 per cent.

That will be viewed as bad news for many Australians who are already struggling with electricity and gas prices, as it shows just how fragile the country's economic stability may be.

According to the report, arresting the drop off in productivity will be essential to ensuring the country's continued success.

"Australia can’t control commodity prices and global demand for resources, but by reversing its slide in productivity, it can take steps to create a softer landing when the boom eventually subsides," it reads.

McKinsey & Company is a worldwide consulting firm which advises some of the world's most renowned businesses, governments and institutions.

Posted by Callum Fleming