ATAR Survival Guide

International Competitiveness

 

What is it?

International competitiveness is the degree to which a country's goods and services can meet the test of international markets while simultaneously maintaining and expanding the incomes of its people in the long term.

 

Basically, think of a country as a shop that sells goods or services. Other countries are competitor shops on the same shopping strip. International competitiveness is the ability for a shop to be able to compete with other shops while continuing to make a growing profit, in other words, being competitive does not come at an economic cost.

 

Determinants of International Competitiveness

International competitiveness is determined by the following factors:

• Labour wages

• Inflation

• Labour productivity

• Exchange rate

• Infrastructure

• Legal & Regulatory System

 

Is Australia Competitive?

Australia has the following characteristics:

• High labour wages (A minimum wage setting of $17.70 AUD compared to the United State's $10.08 AUD an hour - Source: ABC News) - uncompetitive

• Recent low inflation of 1.9% (Oct 2018), but this is in line with most major economies - neutral

• High levels of Labour Productivity ($83,190 per person) - competitive

• Somewhat high exchange rates between 0.70-0.78 USD per $1 AUD - uncompetitive

• Sufficient and reliable infrastructure - reliable and efficient transport network, high levels of investment in education and health infrastructure - competitive

• Effective and efficient political and regulatory system - governing bodies such as ASIC and ACCC have effective powers in enforcing the law and ensuring smooth free markets - competitive

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In a Deloitte Manufacturing Competitiveness research study, Australia was ranked 21 out of 40 countries, with a prediction to be downgraded to number 22 in 2020. While Australia has seen high wages and a high exchange rate, Australia in the long term has maintained a high level of labour productivity, efficient regulatory system and reliable infrastructure to ensure Australian exports remain competitive. 

 

International competitiveness, however, varies by industry. Industries such as mining, are highly competitive due to the investment in capital deepening ensuring a high capital-to-labour ratio.

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