- Depsite Australia’s status as the eighth richest country in the world, the economy that got it there has been ranked 93rd, according to new analysis by Harvard University.
- Comparable to poorer nations like Mali (122nd richest), Zimbabwe (108th richest) and Senegal (116th richest), Australia is heavily reliant on just a couple of sectors like mining, energy and metals.
- In fact just three main products – iron, coal and gas – make up the majority of its net exports by value, despite being far better placed to embrace new industries.
- The analysis shows that Australia adds little of value to its resources, exporting raw materials instead of using its workforce to create value and enrich itself.
- All of those factors threaten a near 29 years of prosperity, with the country being urged to come up with some new economic ideas.
In more evidence of Australia’s status as the ‘lucky country’ it’s been shown that we’ve managed to get rich with a terribly dumb economic strategy.
Despite our relative wealth, new analysis from Harvard University’s Growth Lab ranks our economy, in terms of complexity, as 93rd in the world, trailing the likes of Uzbekistan and Albania — hardly economic powerhouses.
“Australia is less complex than expected for its income level. As a result, its economy is projected to grow slowly,” the report said, forecasting it to be the 111th fastest growth country over the decade.
After 28 years of consecutive growth — an unprecedented streak globally — Australia’s ranking has actually been getting relatively simpler as each year goes by. Coming out of recession in 1991, the country ranked almost 40 places higher at number 57 on the same measure.
Broadly speaking, the analysis shows that Australia is laboured with a dumb economy in which we export plenty of value, but we don’t actually create or add any value ourselves.
Put another way, rather than develop new technology, we sell the raw materials to others to do that. Rather than lead the world, we simply supply those who do. Unsurprisingly, the full national profile makes for sobering reading.
Iron, coal and gas alone account for a staggering 60% of the country’s net exports, illustrating the nation’s enormous reliance on just a few natural resources. While those natural reserves have helped Australia get rich, they’ve also allowed complacency to set in as we’ve ridden good luck, and not good management, to prosperity.
It doesn’t get a whole lot better as you dig deeper. Tourism, food, alcohol, wool and metals make up nearly the whole remainder. In fact, literally everything else that Australia sells amounts to a single digit of our economy.
That’s put in on a similar footing to some of the world’s poorest countries like Mali, Senegal and Zimbabwe. Unlike those nations however, Australia has had few excuses to not do better.
In puts Australia in a precarious position, where the nation’s fortunes are boosted or buffeted by global demand for just a handful of resources. Consider that Australia just recorded its worst financial year in two decades, as the economy continues to stumble. In fact, it would have been the worst since the 1991 recession had it not been for a booming iron ore price that produced a miraculous trade surplus.
That’s not a good long-term strategy.
“The Growth Lab’s 2027 Growth Projections foresee growth in Australia of 2.2% annually over the coming decade, ranking in the bottom half of countries globally,” the report said.
“Economic growth is driven by diversification into new products that are incrementally more complex.”
Instead, Australia has added just seven new export products since 2002 — compared to 17 in New Zealand — with Harvard blaming this for the country’s marked lack of income growth.
So what does Harvard recommend for such a laggard economy?
“With few nearby opportunities, growth can be pursued by making longer jumps into strategic areas with future diversification potential,” it said.
In other words, the country needs to reform and find opportunities to grow.
It brings to mind the famous warning that Singapore issued in 1980, when Prime Minister Lee Kuan Yew said Australia risked becoming the “poor white trash” of Asia if we didn’t open up our economy.
While the Hawke-Keating reforms of the late 80s and early 90s did much to heed that call, Australia has repeatedly failed to embrace the opportunities presented to it since.
From lithium batteries to renewable energy and the age of innovation heralded by former PM Malcolm Turnbull, there are plenty of balls that Australia has been happy to let go through to the keeper.
Harvard’s message, repackaged in the vernacular of the current Prime Minister, is that Australia badly needs to “have a go” if it wants to get one.
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