Originally published by Editorial of The Australian
03.03.2026
Investment competitiveness is a major factor in improving the economy’s dismal productivity and therefore living standards. The Global Investment Competitiveness Index, compiled by the Business Council of Australia, ranked the nation a pedestrian 21st out of 42 countries. The index provides a definitive guide for policymakers in identifying serious underperformance in key areas and pointing to necessary reforms. The most serious problems warrant major reform by the Albanese government, especially business taxation and investment restrictions, for which Australia ranks 38th on both measures.
The business tax ranking, one of the worst in the industrialised word, which has fallen from 19th place in 2019, is a serious obstacle to investment. Jim Chalmers has reportedly ruled out a cut to the headline company tax rate, arguing it would punch a hole in the budget, which is under pressure. But as Greg Brown wrote on Saturday, the Treasurer is considering alternatives, such as targeted tax breaks to encourage productivity-encouraging investment.
The 30 per cent headline corporate tax rate and the complexity of the system will remain problematic, however, in competing with an average 24 per cent across the countries in this analysis. The survey’s leader in terms of overall competitiveness, Finland, has a headline corporate tax rate of 20 per cent and a system that is not overly complex. Australia’s rate was last reduced by the Howard government in 2001, with Brazil and Costa Rica the only other countries surveyed to leave their rates unchanged for so long. It needs to be cut in the interests of economic competitiveness. Doing so would necessitate cuts in recurrent spending.
Over-regulation, an issue that featured at Dr Chalmers’ Economic Reform Roundtable in August, on which he promises headway is being made, also needs greater effort, with a ranking of 37. Labour market settings, a pivotal issue on which we have consistently advocated reform, are also dragging down competitiveness, rating a mediocre 17th out of 42 countries. That index marker plummeted sharply, from sixth in 2021 to 17th in 2022, the year Labor was elected.
Recent changes have put new impediments in the way of businesses working collaboratively with their employees to innovate and drive efficiency, the BCA argued. The system is also highly complex, with changes to the intractable bargaining regime significantly reducing the incentive to agree to productivity improvements or efficiencies that would ordinarily support higher wages. The system needs greater flexibility, simplification and better balancing to curb the powers of unions that represent a small minority of workers.
On the positive side, Australia ranked second for trade, a marked improvement from 11th place in 2019. That strong performance was driven by tariff reductions and trade agreements. With one in four jobs depending on such openness and integration in global markets, it is an important metric.
Australia’s ranking of 11th for energy suggests many other economies, less endowed with mineral resources, are struggling even more with the transition to net zero.
Despite strong potential and economic advantages, policy reform has far to go if Australia is to match the survey’s leaders – Finland, the US, Estonia, Sweden, and Ireland and Denmark, which tied for fifth place. And if Australia is to step up to rank among the 10 most competitive investment destinations, alongside Norway, the Netherlands, Switzerland, the UK and Latvia, reducing regulation and red tape was identified by Business Council chief executive Bran Black as the “low-hanging fruit”.
At a time when global capital is mobile and highly contested, Australian Institute of Company Directors research showing it now costs businesses $160bn a year to comply with federal regulation points to the need for a major overhaul to cut costs for businesses and consumers. If other countries are making it simpler and more attractive to invest, one-off changes won’t be enough on their own, the BCA warns. Australian jobs depend on outpacing competitor countries.
