Australia has slipped six places to 15 in world competitiveness rankings for 2012 with significant drops in our labour market and international trade competitiveness rankings.
In releasing Australia's 2012 World Competitiveness Yearbook results, CEDA Chief Executive, Professor the Hon Stephen Martin said key factors in 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, with a number of high profile disputes.
"The high Australian dollar and strong terms of trade have resulted in a drop in Australia's international trade competitiveness which has occurred at the same time as many other countries' economies have slowed," he said.
"With the exception of the mining sector, this has made Australian exports less competitive and negatively impacted industries such as tourism, retail and manufacturing.
"These industries were already struggling with rising global competition and a structural readjustment has been occurring in our economy as a result, with the strong Australian dollar further exacerbating this change.
"Unfortunately, this means in areas such as manufacturing some industries' production will move overseas where there are lower production and labour costs."
However, Professor Martin said government should not intervene with subsidies but instead focus on reducing regulatory burden 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.
"In two years Australia has slipped from five to 15 in global competitiveness rankings and if we are to help protect Australia from future declines we need to increase investment in business innovation and skills," he said.
"Australia is unlikely to compete with emerging economies in the production of low-cost, large scale manufacturing. However, 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 we are starting to see this emerge in some states.
"The private sector needs to step up and invest far more in innovation and not simply put their collective hands out for government subsidies if we are to remain globally competitive. In the 90s Australia was a leader in business innovation, but unfortunately this is no longer the case."
The IMD World Competitiveness Yearbook compares and ranks 59 countries on business competiveness criteria and is the world's most renowned and comprehensive annual report on the competitiveness of nations.