Abstract
Total factor productivity (TFP) was used for some years as a single indicator for measuring performance of government trading enterprises in Australia. More recently there has been a shift in emphasis towards financial criteria, with little or no mention of TFP. But it is well known that financial measures can be inappropriate for enterprises with market power.We show that it is important to monitor both TFP and financial performance. TFP performance alone can be misleading and be achieved at the expense of financial performance—this is illustrated for Australian National Railways during the 1980s. TFP and financial performance can be directly linked, and this provides a better framework for performance assessment over time. We explore the relationship between productivity, price performance, and various financial measures.
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