Australia has been the dream economy since the Global Financial Crisis, sailing through without a recession while many others faced their toughest time since the 1930s depression.
But negative views among businesspeople about the way the country operates mean we don’t even make the top 20 on the new World Economic Forum’s international competitiveness rankings.
We hold the record for uninterrupted economic growth among major developed countries with 99 consecutive quarters in positive territory, having not gone backwards since mid-1991. And Australia’s admittedly somewhat slow growth rate in recent years has mostly bettered Europe and North America.
But according to the World Economic Forum, we’re only No.22 in terms of competitiveness out of 138 countries and we actually slipped a notch from 21 a year earlier. Meanwhile, over the ditch, our Kiwi cousins jumped three notches to 13, the UK made up the same to sit at No.7 while the Netherlands and Sweden also improved.
So what’s going on and do we deserve such a low competitiveness ranking?
Independent economist Saul Eslake says it’s important to be clear about what the WEF is actually measuring.
“It bears no relationship to economic growth; China and India have been growing very strongly for 20 years and they’re ranked much lower than Australia.”
John Quiggin, economics professor at University of Queensland, added: “It’s about ideology rather than outcomes. Australia has consistently outperformed New Zealand in terms of income and a significant part of the New Zealand workforce lives in Australia, yet we are ranked lower.”
While the way WEF measures competitiveness is in part objective, there is also a strong element of subjectivity which gives weight to Professor Quiggin’s view. Objective measures include statistical data from international bodies like the World Bank, IMF and Unesco while the subjective measures include the views of businesspeople on how the country performs.
The top three concerns among businesspeople for doing business in Australia were restrictive labour regulations, high tax rates and inefficient government bureaucracy.
That led to some surprisingly bad outcomes for Australian competitiveness. We ranked No.54 in labour relations co-operation, a shocking No.111 in wage flexibility, No.24 in our business financing ability and only No.77 for the burden of government regulation.
Those outcomes don’t bear up to reality, Mr Eslake believes.
“In regards to the regulation of the labour market, business executives seem to believe we are at the French (highly regulated) end of things when we are closer to the US (deregulated) end,” he said.
“So we’re at No.23 in terms of the macro-economic environment, No.24 in access to finance and 100 on tax rates; really? Those views might have had some validity 25 or 30 years ago when there were low-hanging fruit in terms of reform. But we plucked most of them a long time ago.
“If we just used the objective measures Australia’s ranking would have been higher.”
However, the mining boom reduced Australia’s competitiveness by allowing the country to avoid some hard decisions in tax reform which would have boosted productivity, said Stephen Anthony, chief economist with Industry Super Australia.
“Before the mining boom we were in good shape but our competitiveness has been slipping. The Henry Review (on tax) gave us the opportunity to put a world class tax system in place but we did nothing about it. The one thing we tried, the mining tax, we mucked up,” Dr Anthony said.
“This is a warning sign and if we don’t act our income will fall relatively speaking.”