New Zealand’s global competitiveness goes up as Australia plunges down

New Zealand Prime Minister Jacinda Ardern has claimed that capitalism has been a “blatant failure” for the nation. In spite of this, the Institute of Public Affairs declared that New Zealand thrashes Australia in the competitiveness rankings.

IPA research fellow Daniel Wild said the Kiwis clearly have the upper hand in the economic competitiveness stakes, and they can substantially liberalise their economy with welfare, industrial relations and tax reform. The free-market think-tank analyses how Australia and New Zealand fare in the World Economic Forum’s annual Global Competitiveness Report.

Australia was in the ninth spot in the list of most competitive countries in 2014. The result was based on up to 114 indicators, which include the quality of infrastructure, macroeconomic health and efficiency of the labour market.

Today, Australia was down to the 21^st spot. New Zealand, on the other hand, has improved its ranking from 18th to 13^th over the same period.

Australia’s declining competitiveness

According to Wild, Australia’s declining competitiveness means businesses are choosing to invest somewhere else. As a result, the country sees less job creation, lower salaries and slower growth.

“Businesses must run a gauntlet of red tape, high taxes and an archaic industrial relation system to invest in Australia,” Wild said, adding that many would rather skip the headache and invest in other countries.

The IPA’s research note also emphasises the country’s massive debt burden, which is forecast to reach $725 billion in the next decade. It says the expectation of higher taxes in the future discourages business investment by reducing expected returns on long-term projects.

The research note recommends reducing red tape to boost the competitiveness of Australia. This could be done by requiring two regulations to be eliminated for each new regulation created, lowering business and personal taxes and reducing government debt. It also suggests making it easier for businesses to hire and fire workers.

Furthermore, the research note says Aussies have become complacent when it comes to their economic prospects after years of economic growth. But growth, it adds, is not automatic and serious economic reform is required to safeguard prosperity.

Ardern has said there was “no point gloating about the economic growth of a nation if you have some of the highest rates of homelessness in the developed world,” News.com.au reports. Ardern won the support of New Zealand First to form government and became New Zealand’s prime minister-elect last month.

CNBC/YouTube