Latest world rankings a warning for Australia
Posted : Wednesday, May 30, 2012
Opinion piece from Professor the Hon Stephen Martin, Chief
Executive of CEDA, as published in the Financial Review on Thursday
The release today of Australia's 2012 world competitiveness ranking of 15, a drop of
10 places in two years, should provide a warning that we cannot
rely on the mining boom to insulate Australia from the global
slowdown and further verifies the increasing concerns being raised
The Committee for Economic Development of Australia (CEDA) is
the Australian partner for the IMD World Competitiveness Yearbook
that ranks 59 countries on their ability to manage their economic
and human resources to increase their prosperity.
This year, Australia has been overtaken by Germany, Norway, the
Netherlands, Denmark, Malaysia and Luxembourg. Big drops in our
labour market and international trade competitiveness rankings are
the key contributors to our slide down the rankings.
Significant reasons contributing to Australia's poor ranking for
labour market competitiveness included the high Australian dollar,
skills shortages and the re-emergence of industrial relations as a
key national issue, highlighting the increase in the number of high
profile disputes in the Australian economy.
While economists and policy-makers have acknowledged for some
time the negative impact of the high Australian dollar on sectors
such as manufacturing, retail and tourism the reality is Australia
is likely to see more manufacturing production move overseas where
there are lower production and labour costs.
We know Australia is unlikely to compete with emerging and
developing economies in the production of low-cost, large scale
manufacturing, particularly in our own neighbourhood. But of
even greater concern is increasingly we are going to have to
compete with Brazil and Africa in the mining sector - the sector
that has largely been responsible for protecting Australia from the
global economic slowdown.
Governments and some economic commentators seem to believe that
the mining boom will go on indefinitely regardless of evidence of
slowing commodity prices and demand from traditional markets, skill
shortages and regulatory instability and barriers.
Previously the sheer demand for our resources and immaturity of
emerging global resource competitors ensured that the cost of doing
business here was not a significant barrier. However, the reality
is the increasing cost of doing business in Australia is beginning
to impact this sector, with commitment to major projects being
reassessed or deferred.
Yet the commentary around how to resolve these and other issues,
particularly whether Australia should continue to sustain
non-competitive industry sectors, is caught up only in an argument
about subsidies and employment support in marginal electorates.
Government should only intervene with subsidies and hand outs
where a clear strategic imperative can be demonstrated. Instead
their focus should be on reducing regulatory burdens to allow
businesses to become more competitive, and invest in skills
allowing businesses with long-term viability to make the necessary
adjustments to survive the current changes in our economy.
Increased investment in skills, in particular science, research
and technical skills, would allow us to be a leader in high value,
high-tech manufacturing and in resource extraction and development,
increasing our ability to deliver high value product.
And of course it is the services sector, a sector that comprises
some eighty per cent of Australia's economic activity that needs
careful strategic support from governments to take advantage of
opportunities being presented through the current phase of
But this is not simply an issue where government action is
The private sector needs to step up as well and invest far more
in innovation and not simply put their collective hands out for
In the 1990s Australia was a leader in business innovation but
unfortunately this is no longer the case. A lack of global
competition and a relatively stable economy has created a
complacent society and has not provided any incentive for business
to innovate. In part this has probably contributed to our
productivity slowdown and must be addressed as a matter of urgency
as the World Competitiveness Yearbook has highlighted.
Professor the Hon Stephen Martin
Chief Executive, CEDA
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