The Harvard Kennedy School’s Center for International Development has developed an Atlas of Economic Complexity, with Australia being ranked as having one of the least complex economies. The Atlas measures the diversity and sophistication of national exports, with almost all of Australia’s exports not requiring a degree to make. The Center for International Development contends that for countries to get richer that they need to develop more sophisticated products, but Australia has been very tardy when it comes to innovation. From The AFR:
The enormous wealth generated by iron ore, coal, oil and gas masks, and probably contributes to, an economy that has failed to develop the industries needed to sustain its position among the top ranks of the developed world.
Put simply, Australia is rich and dumb, and getting dumber.
On the primary metric used in the database, an index of economic complexity, Australia fell from 57th to 93rd from 1995 to 2017, a decline that is accelerating. Australia’s top trading partner, China, rose from 51st to 19th over the same timeframe…
The Harvard data exposes the paradox of the Australian economy: the eighth-richest nation in the study has the export profile of Angola.
You will note from the above table that the most sophisticated nations have big manufacturing industries. By contrast, Australia has let its manufacturing industry collapse and now has the lowest manufacturing share across the OECD.
Adding to Australia’s malaise is its ‘dumb growth’ economic model, which relies on importing hundreds of thousands of bodies every year, alongside increasing household debt, which drives consumption and malinvestment into property and catch-up infrastructure, rather than productivity.
Perversely, adding a million extra people every 2.5 years also dilutes Australia’s mineral base – the primary source of its wealth – which then makes us poorer per capita.
“Rich and dumb, and getting dumber” perfectly describes the contemporary Australian economy.