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Australia is rich but lacks complexity and is falling behind
Australia has the eighth highest GDP per capita, yet the economy is lacking in complexity and provides limited natural opportunities to develop new products, according to new research.
Australia is rich but lacks complexity and is falling behind
Australia has the eighth highest GDP per capita, yet the economy is lacking in complexity and provides limited natural opportunities to develop new products, according to new research.
The study, from Harvard Business School, finds that a complex economy is expressed in the products a country can make, and is based on both the diversity of exports a country produces and their ubiquity, or the number of countries that are able to produce the good.
According to Harvard University, Australia’s wealth is very linked to the mining industry, with coal, oil and gas contributing strongly to economy at the expense of other industries.
Growth opportunities
Harvard has found that Australia’s current growth projection is 2.17 per cent to 2027, ranking it number 111 out of the 133 countries studied.
“Australia is less complex than expected for its income level. As a result, its economy is projected to grow slowly,” the study reported.
Given Australia’s current exports, some of the sectors with high potential for new diversification include industrial machinery and miscellaneous chemical products, according to the business school.
With few nearby opportunities, growth can be pursued by making longer jumps to strategic areas with future diversification potential, Harvard has said.
Lacking innovation
Due to strong resource prices, Australia has lacked innovation when compared with the rest of the world.
In the 15 years to 2017, Australia broke into seven new industries.
In comparison, despite being resource-rich, Canada has broken into 11 new product categories over the same period, leading to projected growth for the Canadian economy of 3.1 per cent.
Beginning to change
Australia has started the process of structural transformation, relocating economic activities from low to high-productivity sectors.
Australia is moving out of agriculture into more productive sectors, including textiles, electronics and machinery manufacturing.
While Australia’s presence in textiles is growing, it has failed to break into electronics, with stagnant growth over the previous decade.
Australia’s exports growth in the past five years has been driven by services mainly due to an overall worldwide growth in the sector.
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