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Past the Political Spin: Setting a New Competitive Course

29 Aug 2013 2:04 PM - Article written by Andrew Stockman, RSP Economist

What does it mean to be competitive in the business environment?  As the election looms, it will be interesting to see what the parties put forward to help businesses improve their competitiveness, both domestically and internationally.

Please read the article below or click on the link to read later.

Past the Political Spin: Setting a New Competitive Course

Why competitiveness matters to your business:

“Improving competitiveness and driving productivity” are phrases often used by politicians. However, rarely is there a detailed discussion of what this actually means for government policy and businesses planning in the challenging period ahead. Competitiveness is not just about the exchange rate, large manufacturing or costs – it involves much more. This article puts some “skin on the bones” of the election rhetoric by looking at how competitive Australia is on the international stage, and what can be done by governments and firms to drive productive performance to prepare now for the hazards and opportunities ahead. 

A difficult concept to measure, but we need to get it right:

Competitiveness can be a difficult concept to measure, with many variables, lags, areas and actors involved. Governments set the foundations for competitiveness inputs via its policy decisions at the macroeconomic level. Firms tend to focus on microeconomic decision-making to leverage advantage and profitability from those macro foundations. Get the inputs right and the firms will flourish - firms will become leaner with lower costs, have better products and services, have increased sales including exports, attract investment, be more innovative, and have higher profits. Get it wrong though and firms will stagnate and then flounder.

How competitive are we now... a look at the data? 

The World Economic Forum annually benchmarks hundreds of competitiveness indicators across 144 developed and developing countries. In the latest report Australia has an overall ranking of 20th/144 countries (1= most competitive), a drop of 4 places from the 16th position of 2011. This is a worrying deterioration and does not bode well for growth in the future. Here is a brief look at some of the data:

Item (sub-components)

Ranking

Item (detailed)

Ranking

Infrastructure (all)

18/144

Wastefulness of govt spending

48/144

Macro environment

26/144

Taxation effect (work or invest)

103/144

Labour Market Efficiency

42/144

Total tax rate

107/144

Business Sophistication

30/144

Labour-Employer relations

67/144

Innovation

23/144

Wage Flexibility

123/144

Financial Market Development

8/144

Hiring and Firing regulations

120/144

Local competition

6/144

Pay related to productivity

80/144

Innovation capacity

32/144

Treating customers

25/144

Not the great performance of a AAA rated economy you would expect! Another competitiveness survey carried out annually by the IMD uses different data and methodology, but confirms the worrying deterioration in performance. Australia is ranked 16th/60 countries surveyed in 2013, well below the 7th place position recorded in 2009. It identifies similarly deteriorating competitiveness inputs.

What needs to be done!!!!

Australian competitiveness performance is weakening, and more rapidly so in certain key areas. This will threaten future business growth rates and performance particularly in the key transition period ahead.

The election is an opportunity to have a real debate on improving the policy foundations of competitiveness in the years ahead. If pro-competitive policy can improve at the macro level, then the challenge falls to firms to look at their own competitiveness.  Let’s hope the politicians can get past the spin and rhetoric around competitiveness, and start to act now to support the many smaller businesses that are the bedrock of the Australian economy. In the meantime as we all wait in hope, with affordability of financial services measured at a weak 36th/144, maybe Robinson Sewell Partners can help your firm to begin to set a new or improved competitiveness course toward a more profitable business?

 

 

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