In releasing the Australian results of the IMD World Competitiveness Yearbook which ranks and assesses 63 countries, CEDA Research and Policy Committee Chairman Professor Rod Maddock said the last time Australia was this low in the rankings was in 1996 when it also ranked 21.
“Issues that have been on the national agenda such as energy infrastructure, the corporate tax rate and how to skill Australia’s workforce to take advantage of digital disruption, are areas where we performed poorly and show the importance of resolving these issues swiftly,” he said.
Professor Maddock said key areas where we recorded poor economic performance included trade to GDP ratio, and direct investment flows abroad (57). Conversely one of Australia’s economic strengths was the level of investment flows inward (11).
“CEDA’s report released in April on Outbound investment explored this issue, and highlighted the importance of outbound investment from Australia, particularly to our neighbours in the Asia Pacific region,” he said.
“Australia hasn’t had to focus on outbound investment through the mining boom era but increasingly this is an area that we must focus on as it will help give access to global value chains and increase demand and awareness of Australian products and services.
“Currently only 2.9 per cent of outbound investment from Australia flows to China and India but given the size of these markets that needs to change.
“In the government efficiency rankings the corporate tax rate on profit was the area where Australia had the poorest ranking at 50, highlighting again why change is needed to make us internationally competitive.
“Other areas where we performed poorly were the state of the Federal Budget (40) and effective personal income tax rate (44).
“On business efficiency, areas for improvement included entrepreneurship (59), remuneration in services professions (58) and agility of companies (56).
“Remuneration in services is concerning given the majority of Australian workers are engaged in service industries and it is a sector with significant growth potential for Australia, now the mining boom has passed.”
Professor Maddock said our weaknesses on the infrastructure front were energy infrastructure (56), communications technology (54) and connectivity (49). However, investment in telecommunications infrastructure was one of our strengths, ranking nine, showing that some of our weaknesses may improve in coming years if this investment continues.
Professor Maddock said for the first time the overall competitiveness ranking is also accompanied by a separate digital competitiveness ranking, with Australia coming in at 15.
On the digital competitiveness ranking, countries are rated on three core areas, knowledge, technology and future readiness, with three subsets ranked under each of these.
Professor Maddock said the areas of most concern were training and education, where we ranked 51, and business agility with a ranking of 42.
“These two go hand in hand because if people have the right skills and training then business can use these talents to adapt and embrace new opportunities as technological change disrupts business,” he said.
“The fall in our business agility ranking was the key driver in Australia’s overall future readiness ranking – the level of a country’s preparedness to exploit digital transformation – falling from seven to 14.
“Other countries have moved much more quickly to ensure digital competency of their workforce but Australia still has some way to go in this space.
“The Federal Government has significantly ramped up focus on this area, for example with the National Innovation and Science Agenda, which is great to see, but this ranking shows more still needs to be done. There needs to be increasing focus at all levels of education on digital skills, and education and skill development can’t stop once someone enters the workforce.”
Professor Maddock said results from the executive opinion survey show that our stable legal environment was what the business community ranked as the key attractiveness factor for our economy.
“The area that ranked the lowest in the survey was a competitive tax regime. CEDA has been calling for more significant tax reform for some time and this result shows the business community in Australia agrees,” he said.
The rankings are part of the Switzerland based IMD’s 2017 World Competitiveness Yearbook, which compares and ranks 63 countries based on more than 340 business competitiveness criteria. Two-thirds are based on statistical indicators and one third is based on a survey of more than 6000 international executives conducted in February/March this year. CEDA is the Australian partner for the yearbook.
Overall Hong Kong again ranked first followed by Switzerland and Singapore. The US dropped out of the top three to fourth.
Learn more: World Competitiveness Yearbook 2017