Australian Businesses Look Overseas After 2 Decades of Falling Competitiveness

Australian dollars in Sydney, on Jan. 15, 2016. AAP Image/Joel Carrett

Australia’s global competitiveness is declining as more businesses struggle to thrive domestically, leading them to explore opportunities abroad.

A new report by the Business Council of Australia highlights current trends, including stagnating productivity growth and mounting pressure from international competitors, raising concerns about the nation’s economic future.

The report, released on Nov. 18, said sliding competitiveness contributes to lower productivity by luring scarce resources away from more productive sectors.

“This can mean more persistent inflation.”

Slipping in Global Rankings

It reveals that Australia has been sliding down international competitiveness rankings for two decades, with productivity growth in the last decade being the worst in six decades.

“Many other countries are vying for growth opportunities. Some are actively working to attract investment that may otherwise flow to Australia, including through initiatives such as the U.S. Inflation Reduction Act (IRA) and reduced corporate tax rates,” the report said.

The report warns that Australia stands at risk of missing out.

“Over recent decades, complacency has played a role in our relative demise. We took our foot off the productivity and reform ‘pedal,’” it said.

It warns that if the productivity crisis is not addressed, then Australians will struggle to maintain the extraordinary quality of life that we enjoy.

“Productivity is the primary factor which will define Australians’ future quality of life. Simply put, there are ‘no free lunches’ and we must be able to produce more with what we have if we are to sustain growing wages and national prosperity,” the report said.

Australia Urged to Act

The report comes as the Trump administration has committed to slashing the U.S. corporate tax rate to 15 percent, following a cut from 35 to 21 percent in 2017.

Nationals MP Barnaby Joyce, previously told The Epoch Times that if the United States cuts its corporate tax rate, Australia would be “at risk of capital flight.”

Saul Eslake, an independent economist, echoed similar concerns.

“There would probably be renewed agitation for Australia to lower its company tax rate,” he previously told The Epoch Times, adding that if this came to pass, Australian shareholders would end up paying higher income tax on dividends due to the imputation system.

Meanwhile, industrial relations think tank, the HR Nicholls Society, said Australia needed to mimic the Trump administration’s deregulation agenda.

“If we don’t take similar steps, we risk being left behind in this global economic shift,” said Society President Frank Parry KC in a statement.

Reverse Dropping Productivity

The report recommends streamlining red tape and reversing recent workplace relations changes to boost productivity.

Tax reform is highlighted as a way to encourage business investment and improve education and training to address skills shortages across various sectors, including construction trades.

Despite significant spending, school standards continue to decline, risking under-skilled graduates entering the workforce.

Additionally, it highlights the critical role of energy transition in decarbonising the economy but warns of significant challenges that could raise energy costs, impact industries, and worsen the cost-of-living crisis.

Challenges include ensuring reliable energy supply that can always meet demand, even when renewable sources cannot. This issue has forced many of Australia’s aging coal plants to extend their operations beyond their intended retirement dates.

“How we tackle these headwinds [to the economy’s decarbonisation] will impact energy costs in Australia and if not managed well, could be a significant drag on industrial activity, in particular, and a key driver of the cost-of-living crisis for households in the future.”