In the past two years, Australia’s viability for the future has dramatically decreased and its need for reform with regards to economic, social and ecological sustainability has increased enormously.
This of one of our findings in this year’s Sustainable Governance Indicators (SGI) by the German Bertelsmann Stiftung. It’s an international monitoring tool which sheds light on the future viability of all 41 countries of the OECD and European Union. On the basis of 136 indicators we assess government actions and reforms. More than 100 international experts are involved in our study.
In comparison with the other developed industrialized nations, Australia is now ranked just 25th in future viability, dropping ten places in comparison with our 2014 survey. It is now 13 places behind neighboring New Zealand and on a similar level to Poland. Thus with regards to the need for reform in important economic, social, and ecological policy fields, Australia is one of the biggest losers in our study this year.
We found major reform needs in many policy areas, including research and development, social inclusion, and environmental policy. Australia must improve considerably here if it wants to secure its future viability in the long term.
However, when assessing the steering and reform capacity of the political system Australia receives above-average scores in our study, ranking 11th out of 41 nations.
Overall, the Scandinavian countries achieved the best results, with Sweden ranking first, followed by Switzerland and Germany. Of the largest national economies, only two G7 nations (Germany and the United Kingdom) are among the top ten. The U.S. moved up one rank, but is still below average. Greece continues to come in last in the comparison among countries.
With the end of the commodity boom, a growing need for reform
In our Policy Performance Index, sharp contrasts were revealed between excellent scores for integration policy and massive deficits in the areas of research and development, social inclusion, and the environment.
One reason Australia scored so well in integration policy is that job opportunities for immigrants are approximately as good as those for native-born Australians. No other OECD country – with the exception of Hungary – does so well in this regard. Our study praises the effectiveness of Australian integration policy, but we also found weaknesses and challenges, including the country’s uncompromising treatment of asylum seekers who try to reach the country by boat from Southeast Asia.
Australia’s increasing need for reform is mainly due to the end of the commodity boom, which has led to stagnation in living standards and a rise in unemployment rates since 2011. We found that with the end of the boom, Australia must develop new growth industries. Manufacturing, tourism, and education services appear unable to fill the gap.
In research and development, Australia ranks just 26th out of 41 countries in our study. Although it provides significant public financial support for research and development, the results are quite disappointing. For example, Australia registers just 77 patents per million inhabitants per year, compared with 335 in top-ranked Japan.
Australia is generally in need of significant public investment to bring its infrastructure to a level comparable to other advanced economies. The price for Australia’s low level of public debt has been inadequate roads, ports, and railroads. Yet the structural fiscal deficit impedes large new spending programs for infrastructure.
Lagging in social inclusion and environmental protection
In social inclusion, too, Australia ranks no higher than the lower mid-table range. The poverty level in the population is 13.8 percent. By contrast, in the Czech Republic or Finland just 5 percent of the population have to manage on less than 50 percent of the median income.
We found that the situation for indigenous Australians in particular continues to be the most serious social failure of the country’s policymakers. There have been numerous policy initiatives over recent decades seeking to address the appalling outcomes experienced by indigenous people, but there is little evidence of substantive progress. Remedying this must remain a priority over the coming years.
Australia also has a lot of catching up to do when it comes to its environmental policy. In the past, the country has addressed environmental challenges haphazardly. Considering the country’s climate, there is much room for the development of sustainable policies on energy and the environment. Transport could be made much greener, for instance by using higher excise duties on fuel to improve too often inadequate public transport systems.
With regard to the governmental system’s general reform and steering capacity, however, our study comes to a positive conclusion: Australia achieves 11th place in our Governance Index. Only the Nordic countries plus New Zealand, Luxembourg, the U.S., the United Kingdom, Canada, and Germany rank higher.
Among the strengths of the Australian governmental system, we found the efficient coordination between ministries as well as the parliament’s role in helping to shape policy and its supervisory competence.
Thus, there are reasons to be confident that Australia will be able to overcome the challenges outlined above. But the country’s performance in our international assessment of policy-making and governance should be a wake-up call.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
