Australia’s economic miracle is running out of road, as evidenced by recent disasters in both its global competitiveness and GDP growth rankings. As a result the country has sunk from 20th in the world to 60th in real GDP growth per capita. This change signals a more troubling economic stagnation. It has led Australia to 68th out of 69 countries on the IMD World Competitiveness Yearbook 2025. This decline raises acute alarms on the country’s business dynamism and competitiveness, as well as its macroeconomic vitality.
In the current storm, the Australian dollar is performing a decent job at holding ground. Since then, it has made up 0.4% to sit at around 65.2 US cents. Yet, in the words of analysts like Cassandra Winzar, chief economist at the Committee for Economic Development of Australia (CEDA), there are catastrophic issues on the horizon. They argue that stagnant productivity growth and falling U.S. business dynamism require immediate action.
Australia’s Competitive Landscape
According to the Swiss-based Institute for Management Development (IMD), Australia’s disappointing 11th place in the World Competitiveness Yearbook uncovers major gaps. In fact, this year the nation plummeted from 13th rank to 18th. Overwhelming key drivers such as economic competitiveness, government accountability and efficiency, business competitiveness and efficiency, and infrastructure heavily contributed to this drop.
Winzar warns that boosting Australia’s business efficiency has reached an urgent priority. She states, “Along with poor perceptions of the efficiency of our large corporations (62nd) and another fall in perceptions of workforce productivity (60th), this report highlights the important role that Australian businesses play in driving national competitiveness and productivity.”
Australian firms placed an awful 54th in their adoption of digital tools and technologies. Winzar is passionate about helping businesses understand how to integrate artificial intelligence into the workplace. First, he encourages employers to facilitate widespread AI adoption through the establishment of training programs. Employers need to empower and incentivize workers to adopt AI tools when they make sense—including training workers to use those tools—to make sure we’re not getting left behind,” she adds.
Economic Challenges and Government Response
The new economic paradigm presents an unprecedented array of hurdles for Australian policymakers to overcome. Our Treasurer Jim Chalmers has expressed increasing concern over the new Israel/Iran war. He believes it would prove one of the biggest economic drivers for Australia’s economy. Additional uncertainty from international affairs puts pressure on a more troubling economy.
In light of these pressures, and Australia’s slow productivity growth overall, the Albanese government recently pledged to hold a new productivity roundtable to renew the nation’s economic dynamism. Winzar is optimistic that this new effort will lead to real and concrete policy results. “We hope the Albanese government’s recently announced productivity roundtable yields tangible policy outcomes that can lift us out of this funk,” she remarks.
Additionally, CEDA is pleased that tax reform has been embraced as a key priority of the Federal Government. Winzar highlights the necessity for reform, stating, “CEDA has long been calling for tax reform to be part of the Federal Government’s agenda, and this report makes the need even more clear, given our consistently high levels of company and personal income taxes (ranked 59th and 58th respectively).”
Moving Forward: Rebuilding Australia’s Economy
In spite of these disappointments, there is a helpful indicator of cautious optimism in the market. The Australian Securities Exchange (ASX) is set to open flat. Futures are indicating a positive open of 0.06%, or 5 points, to 8,565 points. Even if it doesn’t, this small increase can be a source of optimism within a troubling economic context.
“With inflation looking to be under control in the short term, we must now tackle the longer-term challenges holding back our economy,” she asserts.
She further elaborates on strategies that could enhance productivity. “Key to this is lifting weak productivity through measures such as streamlining regulation, encouraging business investment and undertaking broad-based tax reform.”
Australia has experienced significant economic headwinds recently that have led to a lost decade. It’s more important than ever that stakeholders across all sectors come together and address these challenges head on.
