The biggest single brake on Australian productivity is the mining industry, where productivity has declined by more than a quarter in the past two years, an analysis of ABS data reveals.

Industry gross added value per hours worked data from the most recent national accounts and labour force data shows a fall of 14% in the mining industry in 2011 in nominal terms, while it grew in the overall economy by 2%. In contrast, in the under-pressure manufacturing sector productivity increased by 8% in 2011. The construction sector has also lifted productivity over the past year, with gross value added per hour up 7%. Productivity in retail, which is far more stable than in most industries, was flat.

However, productivity in the health and social care sector, the biggest and one of the fastest-growing employers, only grew 2.4% and was down on two years ago. It also fell over 4% in public administration.

The figures illustrate why the story of Australian productivity is far more complicated than either the business sector or its media cheer squad will let on.

The business/media narrative is that only the 1970s-style restrictions of the Fair Work Act, greedy unions, regulation and high corporate taxes stand in the way of Australia continuing the productivity revolution of the 1980s and 1990s.

Whether that revolution even happened remains a matter of debate, but let’s leave that aside for the moment.

The story from industry-specific figures, however, shows simply: different industries have different productivity challenges. This seemingly obvious point often goes missing in the productivity debate (such as it is).

For example, GAV per hour in agriculture is tremendously volatile for obvious reasons — agriculture is seasonal, and prone to external factors such as drought (or flood). In retail, it’s far more stable, despite claims that the Fair Work Act has imposed unreasonable constraints in employers. Mining is the most productive industry per se — more value is produced per hour than any other industry, with only financial services even close — but its poor productivity growth performance is attributed to its massive expansion through investment and employment growth, with output failing to keep pace. Higher commodity prices also make more difficult, lower-productivity mines more viable.

Construction, in contrast, has seen a shift from residential construction to larger-scale infrastructure and civil engineering, which will have driven smaller, less-efficient contractors out of business and generated greater economies of scale in large projects.

The best productivity measure is competition. There’s no surprise that manufacturing has generated a big rise in productivity: it is under tremendous pressure from a high dollar and the resulting foreign competition; less-efficient firms are being forced out and managers in the rest of the sector are hunting for the efficiencies they let slide when times were better. From this point of view, the higher dollar is driving a productivity shock through trade-exposed industries, and the more we do to shelter industries from the impact of the higher dollar, the more we negate the resulting productivity improvement.

Public sector productivity is critical. Conversely, sectors without competition are more resistant to the search for efficiencies. That’s partly because productivity can be much harder to accurately measure, particularly in areas of the public sector where key decision makers are entirely divorced from the ramifications of their decisions, as is the case with politicians.

But as Australia’s largest employer, and likely to one day employ one in six Australian workers, productivity in the health sector is crucial to our overall productivity performance, as well as a major and growing call on the budget. The extent to which the federal government’s 2011 reform package improves competitive pressures in areas such as performance information, more local management and less separation between funder and provider will have ramifications for productivity for decades to come.