Australia faces a productivity and competitiveness crisis, according to many economists, business leaders and op-ed writers. They even point to global competitiveness scores to illustrate their point.
“Australia’s sluggish productivity, poor levels of entrepreneurship and high-profile cyber hacks have taken their toll in the latest ranking of global competitiveness, as experts suggest countries including Switzerland and Singapore could offer lessons for our economy,” the Financial Review reported in June 2023, citing that year’s “International Institute for Management Development World Competitiveness Yearbook”.
The IMD index is one of a slew of international comparisons purporting to measure how competitive, productive or innovative various countries or regions are. The original index belongs to the World Economic Forum, but IMD was the first to copy it and has been running it since the late 1980s.
Such indices typically elevate tinpot dictatorships with dodgy human rights records and poor labour protection like the UAE and Qatar over democracies, tax havens like Ireland over nations that try to get corporations to pay tax, and countries lacking the rule of law like China over countries with well-established legal institutions.
The media is usually happy to uncritically report Australia’s performance in these exercises, especially if they fit business narratives. The Financial Review was happy to report Australia’s poor performance — 19th globally — last year and quote people from neoliberal lobby groups like the Committee for Economic Development of Australia — which “partners” with IMD — on the need for “economic reform”.
But the 2024 “yearbook” just came out this morning, without the usual round of lamentations. The Financial Review eventually covered the report in its breaking news blog, but in a curiously flat way. Why? Because “the latest Institute for Management Development (IMD) World Competitiveness Yearbook report has placed Australia 13th out of 67 countries, boosted by strong commodity prices and a healthy jobs market.”
That’s Australia’s highest result since 2011, which doesn’t quite fit the narrative about Labor mismanaging the economy, harming business with industrial regulation or presiding over a “productivity crisis”. It’s almost as if the economy, after a lost decade of poor competitiveness, has lifted back to where it was when Labor was last in power.
“Australia’s competitiveness jumps to highest level in 13 years,” CEDA said in an accompanying media release, though that didn’t stop it from insisting “the challenges we face have remained stubbornly fixed for many years now, with little sign of improvement. We must do more to diversify our economy and revive our weak productivity.”
But if you examine the details, it becomes clear first, why Australia lifted its ranking and second, why measuring competitiveness is so hard. Australia’s ranking lifted because of factors like much higher migration — something universally agreed to be a bad thing — labour force growth, monetary policy, budget surpluses from Labor banking revenue windfalls, more exports, lower energy intensity and lower inflation. Some of the factors allegedly making Australia less competitive were “exchange rate stability” and real GDP growth (and growth per capita).
“Exchange rate stability” is a curious indicator given this is Australia’s best performance since 2011 — the Aussie dollar has been under 70 US cents since the start of 2023 — but was close to and over parity with the greenback back in 2011, which nearly crushed the economy. There’s definitely good stability and, as Wayne Swan discovered back then, bad stability.
Some of the above factors are directly within the control of the government, others aren’t. Some indicators are simply absurd: one, purportedly a big negative for Australia, is “relocation threats of business”. There’s a “corporate agility” measure, and an “entrepreneurship” one as well, and a “national culture” indicator (whether national culture “is open to foreign ideas”). “Office rent” is a big negative for us, but the cost of residential property, which might deter people from moving here, is not. And the higher the level of working hours, the higher you rate, which rewards countries with exploitive labour laws.
It’s not merely that the index is based on a compendium of neoliberal clichés (company tax is bad, long working hours and poor industrial regulation are good) but that it measures economic outcomes more than any notion of “competitiveness”. Export a lot, have high population growth and high economic growth and have a revenue windfall based on a strong economy and you’ll improve your “competitiveness” as measured by the competitiveness gurus.
Dig down and you’ll discover their efforts to itemise exactly what “competitiveness” really means. You end up with bizarre ideas like “national culture” and “corporate agility”, as well as negative indicators like industrial relations protections, which deliver greater equality and political buy-in for a market economy, or company tax, where there’s little evidence lower rates lift investment, productivity or wages.
In reality, Australia is no more or less competitive than last June. It’s the same economy, with the same strengths, including things that IMD decries, like protections for workers, and an export sector dominated by extractive industries — where we have a natural advantage over competitors — and services exports like universities.
It’s almost as if… competitiveness is just a slogan slapped over self-interested claims by big business. That couldn’t be right, could it?
