Costs at BMA's Bowen Basin operation in Queensland are back to 2008 levels. Photo: Peter Braig
I have some good news for the federal government: labour productivity is going through the roof.
And it's good news the government could do with, given a budget that promises lower economic growth and higher unemployment and relying on housing prices continuing to bubble to grow consumer spending - or growth and unemployment will be worse.
The productivity story is a little bit of upside from the miserable wages growth numbers running at their lowest level since the Australian Bureau of Statistics started its wages index in 1998.
Average wages growth is running below the inflation rate.
But it's much bigger than that. A dramatic example of the productivity surge was given at a conference in Emerald, central Queensland, yesterday.
BMA (BHP-Billiton Mitsubishi Alliance), the company running the Bowen Basin's massive metallurgical coal mines, reported its costs are back to 2008 levels, down more than 30 per cent from their peak. And they're going to be pushed lower as the company's seeks to sweat its assets harder.
And it's not just BMA. The story throughout the resources industry is one of management getting back to cost management with a vengeance after years of boom time excess.
And it's not just the resources industry, but I'll come to that.
There's a hard edge to the cost reduction imperative. Both on and off the official Central Highlands Development Corporation program, the conference talk was of haircuts all round, of suppliers being squeezed in the time-honoured manner of Coles and Woolworths, of prices being cut by 10 per cent and payment terms being pushed out to 60 and even 90 days.(Disclosure: I was hired by the CHDC to chair the conference.)
The incentive for the miners to attack costs and inefficiencies (and therefore boost productivity) is compelling.
According to the Queensland Resources Council, a quarter of Queensland's coal exports are uneconomic.
Take-or-pay transport contracts mean it's less expensive for the mines to keep producing than stop, but 10 per cent are losing $14 a tonne or more, which puts them in the red zone where it becomes cheaper to pay out the rail contracts and close the mine.
But while some mines have closed and others are racing ahead with productivity improvements to stay open, there are new, more efficient mines still coming on stream.
The new mines are building in efficiency that the older ones let go.
But what's happening out there on the coalfields, where the blowtorch of necessity is on the corporate belly, is just the extreme.
A common story
The story throughout the resources industry is one of brutal productivity improvements.
And this from an industry that, nationally, was set to deliver handsome productivity improvements anyway as the construction phase of the commodities boom moved into the production phase.
There are stories throughout the rational majority of Australian businesses where the workforce and management understand that a hypercompetitive environment has replaced the lazy boom years.
As the landmark farewell "To Do List" by the Productivity Commission's Gary Banks spelt out, productivity growth primarily is what occurs in each individual work place.
Governments can help by removing infrastructure bottlenecks, but the real work is done on every shop floor and in every office that grasps that there are always better ways of doing anything.
I am privileged to be able to travel around much of the country, talking to people in multiple industries, both private and listed corporations. The productivity message is pretty much universal, differing only be degree
The further unknown is whether the great fiscal contraction underway in state and federal governments is being conducted intelligently, so it also yields productivity improvements, or whether it will result in fewer services.
The downside of the present national productivity drive is that focussing on cost reduction leaves management less willing to take risk.
When the board and CEO are preaching cost cutting, it's harder for management to propose spending money, by buying the extra machine for example, or hiring the extra worker.
It's business confidence that is the missing ingredient in the formula the Reserve Bank has been seeking to handle economy's transition from dependence on resources construction.
Various RBA heavies have publicly made the point that the economy needs business risking taking to come to the party.
Deputy governor Philip Lowe has devoted a full presentation to examining demographics, productivity and innovation, suggesting that our aging workforce is one of the reasons we have become more risk adverse.
That same presentation contained one of the more counter-cultural recent graphs, showing much of the Australian political rhetoric about productivity has been misleading.
Yes, after a couple of decades of strong performance, Australia's labour productivity growth fell away over the past decade – but so did that of most of the developed world.
In the 2005-12 period, which included a fair whack of the resources boom excess, Australian labour productivity growth was only fractionally behind the OECD average.
Labour productivity growth is only part of what makes up the total multifactor productivity story, but it's a very important part, as spelt out by Treasury Secretary Martin Parkinson last month.
(There's some stuff in multifactor productivity management that gives economics a bad name, such as people preferring artisan bread to the factory stuff being a drag on productivity).
Thankfully, this story is about the labour component that the politicians have tended to focus on.
To get the bigger lift the nation needs, the other factors need to kick in.
Capital has to do its share of lifting as well and it would be nice if government infrastructure spending concentrated on clearing the numerous small-to-medium bottlenecks rather than the bigger, flasher roads projects pollies often prefer.
The good news is that labour is already performing. The counting of that is yet to catch up to the performance, but it is happening.
Well, I think it's good news. Given the government's narrative preferring doom and misery, maybe that isn't good news for the current leadership - it doesn't support their usual story of Labor's labour reforms destroying the economy.
Michael Pascoe is a BusinessDay contributing editor.