australia’s performance in a global market › economic_indicators › ...source: wef global...

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



Composite ranked index with country-specific weights,

to suit levels of development and income ranges



* 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?


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*


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


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.

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