The World Economic Forum (WEF) reckons Australia’s economy is “remarkably consistent yet never stellar” in terms of its competitiveness.
The group’s latest Global Competitiveness Index (GCI), released this week, ranks Australia 22 out of 138 nations in terms of overall performance.
We’re doing pretty well, but could do better, in other words. Sounds like the vast majority of school reports, or Australia’s performance at the Rio Olympics.
Here’s how Australia ranked compared to other nations based on the report’s findings:
According to WEF, the index defines competitiveness as “the set of institutions, policies, and factors that determine the level of productivity of an economy, which in turn sets the level of prosperity that the country can achieve”.
Competitiveness is scored from a range of 1 to 7, and the higher the number the better.
The GCI combines 114 indicators that capture concepts that matter for productivity and long-term prosperity.
“These indicators are grouped into 12 pillars: institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, labor market efficiency, financial market development, technological readiness, market size, business sophistication, and innovation.
“These pillars are in turn organized into three subindexes: basic requirements, efficiency enhancers, and innovation and sophistication factors,” it says.
The flow chart below from the WEF helps to explain how the GCI is constructed.
At 5.19, Australia is behind the likes of Switzerland, United States, Germany, Japan and New Zealand, but above other advanced economies such as Ireland, Israel and South Korea.
In the previous GCI for 2015-16, Australia ranked at number 21 with a score of 5.15.
There’s that unspectacular consistency we talked of at the top. Indeed, according to the report, Australia does not rank lower than 28th across the 12 pillars, and it ranks in the top 10 of three pillars.
Here’s the WEF’s assessment as to what Australia does well:
Notable strengths include access to education and the quality of its education system. Australia places 10th in the health and primary education pillar and 9th in higher education and training. Improving further, Australia now ranks 6th overall in the financial development pillar, thanks to the high level of trust and confidence in the system. The efficiency of the labor market, where Australia used to rank in the 50s, improves further (28th, up eight)—a gain of almost 30 places over the past three years. Despite the prolonged commodity bust, Australia’s performance in the macroeconomic situation (23rd, up five) is strong, with the government reducing the fiscal deficit to less than 3 percent.
While we do a lot of things well, the WEF believes that we’re not very innovative, suggesting that it’s our “greatest challenge and imperative in the face of low commodity prices and China’s slowdown”.
“In both business sophistication (28th, down one) and innovation (26th, down three), Australia not only lags far behind the best performers but also loses ground to them,” it said.
In late 2015 the Australian government launched its innovation agenda entitled “welcome to the ideas boom”, stating that “innovation and science are critical for Australia to deliver new sources of growth, maintain high-wage jobs and seize the next wave of economic prosperity”.
We’re seemingly taking steps to address the issue, the only question now is whether it will be enough given the head start we’ve already given to other advanced economies.
Time will tell.
You can access the full GCI report from the WEF here.