Could it be that investment in scientific research and development is directly linked to a country’s economic competitiveness? If this were true – and there is a great deal of evidence to suggest it is – it might explain why Australia has dropped yet another place in the this year’s global competitiveness rankings, falling behind New Zealand to number 18 in the world.
The poor performance of Australia – which, as we noted yesterday, is set to cut its research budget by 7 per cent more over the next 12 months, and another 10 per cent in the following three years – was highlighted by Committee of Economic Development of Australia (CEDA) on Thursday, in a report analysing the results of the 2015 IMD World Competitiveness Yearbook.
The annual report from the Switzerland-based IMD World Competitiveness Centre, released on Thursday, assesses and ranks 61 economies, according to more than 300 business competitiveness criteria.
IMD director, Arturo Bris, said a general analysis of the 2015 ranking shows that this year’s top countries are going back to economic basics.
“Productivity and efficiency are in the driver’s seat of the competitiveness wagon,” Bris said. “Companies in those countries are increasing their efforts to minimise their environmental impact and provide a strong organisational structure for workforces to thrive.”
But not Australia, which, according to CEDA chief Stephen Martin, has instead been charting a worrying decline over the last five years.
“The overall result is drawn from rankings for four key areas – economic performance, government efficiency, business efficiency and infrastructure and Australia has slipped significantly in all these areas over the last five years,” Professor Martin said.
“Our fall in economic performance is particularly concerning, with a drop of four places from last year to 28, which is a drop of 15 places in the last five years.
“Our ability to innovate and be a ‘smart’ economy with a highly skilled and innovative workforce has been a comparative advantage for Australia and is becoming even more important as our economy shifts away from mining and resources and looks to services to pick up the slack.
“However, these significant slips in the rankings suggest we may not be keeping pace with global competitors at the very time it is becoming increasingly important for our economy.”
Professor Martin also noted that the two areas where Australia slipped the most in the infrastructure category were in technological infrastructure and scientific infrastructure.
“This again suggests we are losing ground as a smart economy, and we don’t have the infrastructure in place to compete in R&D,” he said.
This is hardly surprising. As this Bloomberg article on Wednesday pointed out, the Abbott government’s latest federal budget suggests the Coalition is betting on “baristas over brains” to build Australia’s economy.
“The country that brought you refrigerators, black-box flight recorders, bionic ears and Wi-Fi will cut its research budget by 7 per cent over the next 12 months, and another 10 per cent in the following three years,” said the article.
“At the same time it’s offering tax cuts and write-offs in its budget this month for small firms to buy equipment like espresso machines and lawnmowers as the centerpiece of a plan to build a ‘stronger and more prosperous Australia’.”
The Bloomberg article goes on to quote Australia’s Chief Scientist, Ian Chubb, as saying that every OECD nation has a plan to grow its scientific enterprise and aid its translation into technology, innovation and development … except Australia, which the article points out now ranks in the bottom seven countries based on government spending on research and development as a proportion of gross domestic product.
Of course, what is also damaging Australia’s economic competitiveness – as well as levels of private sector investment in R&D – is its the ongoing political uncertainty that has been dogging key sectors like renewable energy.
According to the IMD report, political stability and predictability has now fallen out of the top five key attractiveness indicators for Australia.
“In addition, Australians were more pessimistic about how efficiently public finances are being managed, with the ranking dropping 14 places to 27,” said Professor Martin.
Overall, the US retained the number one spot in the IMD rankings, followed by Hong Kong, Singapore and Switzerland. The top four have remained the same with Hong Kong and Switzerland swapping places this year.
New Zealand, for the first time in 18 years, jumped ahead of Australia in the rankings, moving to 17 from 20.
“In the Asia Pacific region Australia dropped one place, due to New Zealand moving ahead. Japan had the biggest fall in this group dropping in the overall ranking from 21 to 27,” said Professor Martin.
Professor Martin said the results for emerging economies were patchy, with China improving slightly, Brazil dropping slightly and India remaining in the same place.
The rankings are part of Switzerland based IMD’s 2015 World Competitiveness Yearbook, which compares and ranks 61 countries based on more than 300 business competitiveness criteria. Two-thirds are based on statistical indicators and one third is based on a survey of international executives conducted in March/April of this year. CEDA is the Australian partner for the yearbook.