Industry-Innovation-and-Competitiveness-Agenda

Many of our competitors have recognised the global opportunities and challenges and are
acting to bring their economies into line with international best practice. Advanced economies
are reining-in inefficient government spending, reducing corporate tax rates, deregulating and
improving competition, making investments in infrastructure and skilled workforces, and giving
research a greater commercial focus. Singapore has cut the corporate tax rate many times,
from 40 per cent 28 years ago to 17 per cent now (Prime, 2012; Inland Revenue Authority of
Singapore, 2014). Singapore also offers a special visa class for foreign entrepreneurs who wish
to relocate to start an innovative and employment-generating business. The United Kingdom has
cut public sector net borrowing by a third between 2009-10 and 2012-13 and is forecast to have
reduced it by half by 2014-15. At the same time, the UK has reduced its corporate tax rate from
28 per cent in 2010 to 23 per cent in 2013, and will be reducing it further to 20 per cent by
April 2015 (HM Treasury, 2014; 2013). Canada is promoting competition in the telecommunications
sector, including by capping wholesale domestic roaming rates to prevent wireless providers
from charging other companies more than they charge their own customers (Government of
Canada, 2014). In February, Korea announced its Three-Year Plan for Economic Innovation, which
includes a range of deregulation reforms. Regulations will be required to specify expiration
dates, with sunset clauses to be applied to 50 per cent of all regulations before the end of 2017
(OECD, 2014c).
Australia has many of the fundamentals required for a productive and competitive economy. The
OECD ranks Australia around the average of its member nations on most aspects of government
policy and we rate well on dimensions such as macroeconomic and financial sector policies,
income and wealth, jobs and earnings, and education and skills. For example, Australia is ranked
4th in the OECD for average household disposable income, 5th for per capita GDP and has the
7th highest employment rate (OECD, 2014a; 2014d). Australia also ranks relatively well on the
global indexes of competitiveness compiled by the World Economic Forum and the International
Institute of Management Development (IMD).
Despite this, our competitiveness has been slipping in recent years. Compared to the
productivity boom that commenced in the mid-1990s, when multifactor productivity growth
averaged more than 2 per cent a year, productivity has stalled since 2003 and actually fell
last year, giving Australia the worst performance of the 15 countries compared recently
by the Productivity Commission (Productivity Commission, 2013c; 2014c). Australia’s
growth in wages and energy costs and a higher exchange rate not offset by productivity in
recent years contributed to Boston Consulting Group (2014) ranking Australia last out of
25 countries when it came to manufacturing cost competitiveness. Our costs are some
30 per cent higher than those in the United States. Moreover, Australia fell seven places
to 22nd of 144 countries on the WEF competitiveness index in the five years to 2014. Of
particular concern is that, over this period, Australia slipped 29 places in terms of wastefulness
Industry Innovation and Competitiveness Agenda
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THE CASE FOR REFORM
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