Mr Abbott, don’t let us become the dumb white trash of Asia

Australia’s international competitiveness is slipping and the federal government’s failure to invest in education and R&D will only accelerate the slide.

The latest world competitiveness rankings, released today, have seen Australia slip another place to 17 out of 60 countries surveyed -- a drop of 12 places in five years, highlighting once again why real reform in key areas such as tax and innovation are vital.

Many of the countries ranking above Australia have put a premium on innovation, education and efficient and effective business environments -- factors that are crucial to improving Australia’s international competitiveness.

While our focus more recently has been on emerging economies that can, for example, do high-volume, low-cost manufacturing better than us, the other threat these results reveal is that many advanced economies are now well into their recovery from the global financial crisis and eurozone crisis.

These countries are our competitors as we try to expand further into advanced manufacturing and the export of services such as education, healthcare and finance.

The real issue here is that we can’t afford to drop too far behind the pack.

Key attractiveness factors where we are performing poorly compared to other countries centre on our culture of research and development and a competitive tax environment. Both are areas that the Committee for Economic Development of Australia and many other business and industry organisations have been calling on for reform for some time.

The proposed scrapping of the Gonski reforms and deregulation of university fees, along with cuts to research organisations such as to the CSIRO, are potentially dangerous and counter to where we need to be heading.

Now more than ever we need to become a clever country because with mining investment and resource prices trending down, how will we survive and compete if we’re not developing smart people?

Australia potentially stands to become not only the poor but also the dumb white trash of Asia unless governments realise the importance of education and R&D as a critical component of improving international competitiveness.

The ideological baggage brought to the table by the new federal government must be set aside when we look at education and innovation if we are to become the type of nation that we need to be to survive in a globally competitive environment -- and it needs to happen now.

While the recent federal budget proposes changes and possible increased funding for medical research, we need to change our culture of innovation in a much broader sense, such as through better collaboration between universities and industry so that research reaches commercialisation.

This needs to be driven by both government incentives and industry generally.

READ MORE: Treasury boffins need a science lesson

Results collated from surveys in March 2014 and prior to the federal budget indicated that respondents ranked Australia well on skilled labour and education levels, which means we’ve got all the right ingredients to drive innovation. But we cannot go backwards -- we need to take it to the next level. In particular, we must focus on scientific, technology, engineering and mathematics (STEM) skills.

With respect to taxation reform, while there was a small concession in the federal budget with a proposed lowering of the company tax rate to 28.5 per cent, this is still well above the OECD average of 25.5 per cent, and in fact a number of advanced economies such as Britain and Denmark are moving towards 22 per cent.

There are cogent economic arguments as to why this rate should be much lower to stimulate our global competitiveness, not least being that if it is at an internationally competitive rate it will make Australia a more attractive place to do business, in turn making it easier to entice capital from abroad for private sector projects such as infrastructure. This will also help jobs growth.

At the same time, issues such as raising the rate or broadening the base of the GST seem to remain off the table at least until after the next federal government election in 2016. Which raises the question, if we continue to delay on these key issues, how much further will our global competitiveness slide, and at what cost to Australia’s prosperity?

READ MORE: Detailed breakdown of Australia's world competitiveness ranking

The 2014 IMD World Competitiveness Yearbook, released today, compares and ranks 60 countries on business competitiveness criteria and is the world's most renowned and comprehensive annual report on the competitiveness of nations. CEDA is the Australian partner for the yearbook.

Stephen Martin is chief executive of CEDA.

Graph for Mr Abbott, don’t let us become the dumb white trash of Asia