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Australia’s performance
in a global market
Benchmarks in productivity
and competitiveness
Julie Toth
Chief Economist
• OECD database and reports• IMF economic outlooks• World Bank data and reports• ILO wages & conditions data• US Bureau of Labor• Conference Board ‘Total Economy Database’ (the other ‘TED’)• WEF Global Competitiveness Index and other data series• The Economist Intelligence Unit (EIU)• Angus Maddison’s ‘world economy historical database’• Global consultants reports (e.g. DB, McKinsey, Boston, PwC)• Global personnel agency reports on labour costs & living costs
Global comparisons: data sources and examples
AUD is a key challenge. But raw cost is not the whole story
Source: RBA Exchange Rates database (monthly); RBA Commodity Price Index.
AUD/USD and non-rural commodity price index (in USD)
FX influence in global comparisons? e.g. labour costsAverage hourly labour costs in manufacturing, US$, 2012
Source: Conference Board, International Labor Statistics database.
National minimum wage, purchasing power parity (PPP) basis
Source: OECD, Stat database (data to March 2013).
FX influence in global comparisons? e.g. minimum wages
Sources: OECD Economic Survey of Australia, Dec 2014; OECD Revenue Statistics database.
Meaningful global comparisons? tax structuresTaxes on goods and services Taxes on incomes and related
(% of total taxation, 2011) (% of total taxation, 2011)
Sources: OECD Economic Survey of Australia, Dec 2014; OECD Outlook database.
Meaningful global comparisons? Public sector debtPublic sector debt, % of GDP, data to 2013)
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Index of real house prices, in national currency (1995=100)
Source: OECD Economic Survey of Australia, Dec 2014. OECD, Housing Prices Database.
Meaningful global comparisons? house price growth
National multi-factor productivity (MFP) growth, annual averages
Source: Productivity Commission calculations derived from the Conference Board Total Economy Database, PC 2014.
Meaningful global comparisons? productivity growth rates
Productivity is measured as the volume of output created per unit of input:• labour productivity is measured as output per unit of labour input (hours worked) • capital productivity is measured as output per unit of capital input • multi-factor productivity (MFP) is measured as output per unit of combined inputs of
capital and labour. MFP is the preferred measure of comparative productivity analysis.
Productivity: a global statistical definition
Sources: ABS; Paul Krugman 1997, The Age of Diminished Expectations, MIT.
Productivity: why does it matter so much?
“Productivity isn’t everything, but in the long run it is almost everything. A country’s ability to improve its standard of living over time depends almost entirely upon its ability to raise its output per worker”
(Professor Paul Krugman, 1997)
• Commenced in 2005• Number of countries changes each year:
– 125 countries in 2005, rising to a peak of 148 countries in 2013-14– 144 countries in 2014-15
• Range of data sources expands each year. In 2014-15 they included:– annual ‘executive opinion survey’ conducted by Partner Institutes in each country– OECD and World Bank databases– National Government and data agencies (e.g. the ABS in Australia)
• Regular topical comparison reports built from the same database:– Enabling trade - Human capital - Travel and tourism industries– IT applications - Global gender gap - Regional reports
• WEF ‘Global Risks Report’ is constructed and published separately
WEF’s Global Competitiveness Index series
Source: WEF Global Competitiveness Report, 2014-15.
Composite ranked index based on ‘12 pillars’ and over 100 individual indicators
WEF’s Global Competitiveness Index series
Source: WEF Global Competitiveness Report, 2014-15.
Composite ranked index with country-specific weights,
to suit levels of development and income ranges
WEF’s Global Competitiveness Index series
Source: WEF Global Competitiveness Report, 2014-15.
* Australia is classed as a stage 3 ‘innovation-driven’ economy, due to our high level of GDP per capita.
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WEF Global Competitiveness Indicators: national rankings, 2014-15*
Who is doing well in WEF? What can they teach us?
Source: WEF Global Competitiveness Report, 2014-15.
Rank Country Rank Country Rank Country
1 Switzerland 11 Norway 21 Austria
2 Singapore 12 United Arab Emirates 22 Australia
3 United States 13 Denmark 23 France
4 Finland 14 Taiwan 24 Saudi Arabia
5 Germany 15 Canada 25 Ireland
6 Japan 16 Qatar 26 South Korea
7 Hong Kong 17 New Zealand 27 Israel
8 Netherlands 18 Belgium 28 China
9 United Kingdom 19 Luxembourg 29 Estonia
10 Sweden 20 Malaysia 30 Iceland
Australia in WEF: confirms that “Australia has become an
expensive, less competitive country in which to do business”WEF Global Competitiveness Indicators: Australia’s rankings, 2007 to 2015*
Source: WEF Global Competitiveness Report, 2014-15.
Year Overall
competitiveness
Flexibility of
wages
Burden of Gov.
regs
Technological
readiness
Business
Innovation
2007-08 19 87 68 17 22
2008-09 18 90 66 19 20
2009-10 15 75 85 20 20
2010-11 16 110 60 23 21
2011-12 20 116 75 22 22
2012-13 20 123 96 19 23
2013-14 21 135 128 12 22
2014-15 22 132 124 19 25
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% of respondents who identify each factor as one of their top 5 problems
Why? Top 5 impediments to doing business in Australia*
* Respondents were asked to select the five most problematic factors for doing business in their country, from a list of 15
possible factors. Source: WEF Global Competitiveness Report, 2008-09 to 2014-15.
Labour market efficiency measures, Australia’s global ranking
Source: WEF Global Competitiveness Report, 2008-09 to 2014-15.
Why? Relatively poor labour flexibility
Government related performance measures, Australia’s global ranking
Why? relatively higher regulatory burden
Source: WEF Global Competitiveness Report, 2008-09 to 2014-15.
Australian competitiveness indicators in the top 10 global ranking, 2014-15:Positives? Australia’s strengths in the WEF rankings
Source: WEF Global Competitiveness Report, 2014-15.
1st secondary education enrolment rates;1st Legal Rights Index;1st ability to manage inflation;3rd soundness of banks;4th number of mobile broadband subscriptions per 100 people;5th number of days required to start a business and 5th number of regulations that must be met to start a business;6th level of development in our financial markets;6th tertiary enrolment rates;8th efficacy of corporate boards; and8th intensity of local competition.