Over these years, we benefited from a noticeable pick-up in productivity growth, partly due to a period of substantial economic reform. However, the story over the past decade is quite different, with productivity growth being noticeably slower.1 The good news is that this did not lead to slower growth in our living standards (this is apparent in the two lines moving apart gradually).
The reason for this is the very substantial increase in Australia’s terms of trade over this period. With rapid growth in Asia pushing up the prices of commodities, Australia’s export prices increased substantially relative to our import prices.