Analysis Highlights Decline in Australia's Economic Competitiveness

Australia's economic competitiveness has decreased, a trend attributed by some analyses to a perceived lack of ambition in leadership and a system resistant to significant change. The concept of "tall poppy syndrome," which discourages excessive success or ambition, is noted as a cultural factor that may also influence economic and political dynamics. Historically, Australia saw ambitious economic reforms during the 1980s and early 1990s, particularly under the Hawke-Keating government. These reforms included tariff reductions, increased banking licenses to enhance competition, and financial incentives for states and territories to implement pro-competition policies. These measures were credited with accelerating economic growth. However, some deregulation, such as easing bank regulations, later contributed to issues like the banking royal commission. The Organisation for Economic Co-operation and Development (OECD) recently reported that Australia, once a leader in pro-competitive policies, has fallen behind. The report highlights excessive and inconsistent licensing and permitting requirements across state borders as a significant barrier. An example cited is the multi-layered licensing required for hairdressers in some Australian states, contrasting with countries like New Zealand and the UK that rely on voluntary accreditation. Such regulatory burdens impede entrepreneurship and business mobility, contributing to a decline in Australia's ranking for ease of starting businesses. Reduced competition is observed, with fewer new firms challenging established companies. This trend has led to a concentration of power among large businesses in sectors like supermarkets, banking, and airlines, potentially resulting in increased profits for these dominant entities due to decreased competitive pressure. Fostering competition through easier business setup and labor mobility is crucial for productivity growth, which can lead to lower prices and higher living standards. Australia faces unique geographical challenges that affect competition, including its distance from international markets, which increases import costs and reduces foreign competition, and a dispersed population that limits the viability of multiple competing businesses in some regions. The OECD report attributes approximately 45% of the productivity gap between Australian and U.S. workers to Australia's geographic remoteness. The current Australian government has implemented measures to enhance competition, such as banning non-compete clauses for workers and establishing a National Productivity Fund to incentivize state-level reforms. However, the OECD suggests further actions, including streamlining inconsistent licensing and permit processes, and empowering the Australian Competition and Consumer Commission (ACCC) with greater investigative and data-gathering capabilities, such as allowing it to initiate pricing inquiries and extract relevant business information independently. Australia has historically been recognized for its competitive culture. Despite ongoing challenges like geographic distance, fostering a renewed competitive drive and implementing targeted reforms are considered essential for improving living standards and regaining its position among leading economies.