PwC’s productivity scorecard found that the mining industry was generating 56% less output per hour of work employed compared to 2002, while output dropped 44% in terms of capital employed.

Both have fallen every year since 2002.

However, productivity in the December quarter rose among iron ore and coal miners due to aggressive cost cutting.

The measures resulted in a 37% drop in hours worked in the coal industry in the six months to December 31 and a 10% fall in hours worked in the iron ore sector in the fourth quarter, both of which led to rises in productivity.

Iron ore already had the industry’s best productivity levels.

PwC energy, utilities and mining leader Jock O’Callaghan said while many miners were cost cutting, others had deferred expansion plans or scaled back existing operations, which should lead to a further rise in productivity in the current half.

“But austerity is not the key to unlocking the industry’s productivity puzzle, not just in coal and iron ore but across the resources industry,” he said.

“What is required is greater investment in processes and changing the way the industry does business.

“The worm did start to turn in the December quarter but for many, cost cutting should mark the first phase in a long-term plan to improve productivity.”

O’Callaghan said the bulk of recent cost cutting needed to be seen in the context of the boom in commodity prices and their subsequent fall in the second half of last year.

“During the high price phase of the boom many miners sought to rapidly increase production and put in place processes and contractual arrangements that are no longer suitable for the environment, where overall demand remains strong but prices are tracking lower,” he said.

“You can’t unpick these things apart overnight but it must be done and in such a way that satisfies markets and investors.

“This is a real challenge.”

The report said barriers to mining’s productivity included long lead times to achieving returns, falling ore grades and supply chain issues.

“Some companies don’t have any short-term levers left to pull and will need to set their sights on longer term productivity improvements,” O’Callaghan said.

PwC said the oil and gas industry was an exception.

“Productivity may worsen in the short to medium term while the vast coal seam gas/LNG projects in Queensland and Western Australia remain in development phase,” O’Callaghan said.

“As these major projects reach completion workforces will naturally reduce in size, therefore lifting reported productivity.”

Queensland is already the worst state for productivity, while New South Wales is the best, though still below 2002 levels.

The report also found that support services accounted for 13% of hours accrued to the mining industry, up from 3% in 2002, representing a compound annual growth rate of 26%.

O’Callaghan said productivity performance could be measured in three categories – labour, capital and assets.

“Unfortunately, the productivity debate often talks about these things in isolation but really, we should remember that one often does affect the other and sometimes that is in a positive way and sometimes it’s not,” he said.

O’Callaghan said it shouldn’t be forgotten that Australia’s mining industry was extremely productive.

“Putting aside the most recent quarter, in a relative sense the industry remains less productive than it once was, its position continues to deteriorate and productivity should be greater than it is at present,” he said.

“Miners will take on the productivity challenge in different ways, including asset optimisation, process improvement and reorganising corporate structures.

“There is no obvious or fail-safe approach. But one thing is clear – it is not all about cutting costs."

Newcrest Mining boss Greg Robinson said last month that productivity would be the company’s biggest focus going forwards, while a separate PwC report earlier this year said that 95% of gold companies would be aiming for productivity improvements.