For the first time in the history of the World Economic Forum’s competitiveness index, New Zealand is ranked higher than Australia.
New Zealand has outperformed Australia on the latest Global Competitiveness Index for the first time, according to an annual report compiled by the World Economic Forum.
New Zealand climbed five places from last year to come in at 18th on the overall ranking of global competitiveness, while Australia slipped one place to drop out of the top 20 for the first time with a score of 21.
The annual Global Competitiveness Report is compiled from 111 indicators, categorised into 12 pillars of competitiveness in four main sub-indices: basic requirements, efficiency enhancers, and innovation and sophistication factors.
Dr Oliver Hartwich, Executive Director of the New Zealand Initiative – which helped compile the survey data – said the improvement reflected the steady recovery of the local economy and prudent pro-growth policies that have been put in place to support it, helping New Zealand hold its competitive ground while other countries slipped back amid a weaker global growth outlook.
That contrasted with Australia, which is New Zealand’s second biggest trading partner, where deteriorating labour market conditions (ranked 54th globally, down 12 places from last year) and a heavy regulatory burden (ranked 128th in the world) weighed on the country’s competitive ranking.
“The performance is more startling when you consider that just five years ago New Zealanders were staring at ballooning deficits and a deep recession while the Australian government was debt free and riding the tailwind of a mining boom,” said Dr Hartwich.
New Zealand was ranked among the top 10 in the world for the quality of its institutions, health and primary education, higher education, goods and labour market efficiency, and financial markets development.
Dr Hartwich cautioned against complacency, noting that the country had failed to make any improvement on its innovation and business sophistication factors, ranking 27th globally – behind both Puerto Rico and Qatar.
“We need to focus on boosting our capacity to innovate and in areas of the economy besides our traditional agricultural strengths,” Dr Hartwich said. “The urgency for this is underscored when you consider that Switzerland, which was ranked second in the world for both innovation and business sophistication, was named the most competitive economy in the world for a fifth year straight.”
The next most competitive countries were Finland, Japan, Germany, Sweden, the United States, the Netherlands, Israel, Taiwan and the United Kingdom.
New Zealanders enjoy beating Australia but we shouldn’t let trans-Tasman rivalry blind us to the down side of these results.
That New Zealand’s competitiveness has improved is good but Australia going backwards is bad for them and us.
They are our closest neighbour and one of our most important trading partners.
If their economy is less competitive it makes it more difficult for our companies which trade there.
Our improvement and Australia’s backslide can largely be credited, or blamed, on different government policies.
In a column at the New Zealand Initiative, Hartwich, writes:
. . . Many of our New Zealand members have extensive business relations across the Tasman and are intimately connected to the Australian economy. It has been palpable in recent months how their perceptions of the two economies have changed. While they have become more and more buoyant about New Zealand’s domestic prospects, their assessment of the Australian economy has gradually deteriorated. . .
The survey of Australian business leaders, conducted by the Australian Industry Group, revealed that the most problematic factors for doing business in Australia are restrictive labour regulations, inefficient government bureaucracy, tax rates and tax regulations.
New Zealand, on the other hand, shows an altogether more promising picture. The greatest objective difficulties are macroeconomic circumstances and, unsurprisingly, market size. However, the country scores high for the quality of its institutions, its education and health systems, its goods and labour market efficiency as well as the development of its financial markets. The areas in which kiwi business leaders see the greatest need for improvement are infrastructure, the education of the workforce and the country’s capacity to innovate.
Again, I would take issue with the WEF’s macroeconomic assessment. On New Zealand, it seems too pessimistic to me.
There are some obvious macroeconomic dangers for the New Zealand economy, in particular an overheating property market. On the other hand, fiscal policy has been going in the right direction for the past five years. The current government has maintained spending discipline in the most adverse circumstances.
When Bill English became Minister of Finance in 2008, he not only had to confront the repercussions of the global financial crisis, but also inherited an economy in recession, a collapsed non-bank finance sector and the prospect of deficits for years to come. To make matters worse, two earthquakes destroyed the CBD of the country’s second largest city, Christchurch.
Despite this, the New Zealand government remained committed to returning the budget to surplus while trying to provide some stimulus through income tax cuts. The strategy worked: The New Zealand budget will be in surplus from next year and growth is steady.
This macroeconomic outlook directly translates into the economic mood. According to the ANZ Business Outlook survey, a net 48.1 percent of New Zealand firms expect general business conditions to improve in the year ahead, down from a 14-year high of 52.8 percent in July. In contrast, last month’s National Australia Bank’s survey of Australian business confidence fell to its lowest level since November 2012.
Just this week, Newport Consulting revealed that almost 60 per cent of Australian business leaders believe that Canberra is working against them. Only 13 per cent of New Zealand business leaders said the same about their own government in Wellington.
The same survey also showed that a vast majority of Australian executives experienced a slow-down in the Australian economy, whereas only 37 per cent of New Zealand corporate leaders said the same about their own economy. . .
This reflects well on New Zealand and the National-led government’s policies but there is absolutely no room for complacency here.
The policies which helped New Zealand’s competitiveness have been consistently criticised by the opposition and the policies promulgated by Labour’s aspiring leaders are those which are doing the harm in Australia – restrictive labour regulations, inefficient government bureaucracy, tax rates and tax regulations.
The improvements in New Zealand’s economy which have boosted our competitiveness have taken a long time and a lot of hard work. that isn’t finished yet but all the good could be undone in a very short time with a change of government.
If we don’t have a government determined to maintain spending discipline and focussed on policies which make it easier to do business and employ people, we’ll be following Australia backwards.