This paper examines the rapid rise, and subsequent rapid decline, in labour productivity over the COVID-19 pandemic. It finds Australia’s productivity performance during the pandemic presents no clear long-term implications. This further emphasises the need to address Australia’s long-run productivity problem.

The paper finds this ‘productivity bubble’ can be divided into three phases:

1. a ‘reallocation’ phase, where labour productivity rose as lockdowns were most severe and labour was diverted into relatively productive industries
2. a ‘productivity gain’ phase, where labour productivity continued to rise as lockdowns eased and economic activity slowly rebounded
3. a ‘productivity loss’ phase, where labour productivity declined rapidly and returned to its December 2019 level.

The paper explores the impact of the following factors on these changes in labour force productivity: 

• industry composition
• the growth of the care economy
• the capital-to-labour ratio
• the quality oft he labour force
• firm entry and exit
• labour mobility
• supply chain disruptions
• changes to how people work including remove and hybrid work arrangements.