A free, prosperous society with good governance

Australia’s economic prosperity is built on strong foundations: good governance, open markets and the rule of law.

The World Bank reports that our regulatory systems and governance indicators compare well with other developed economies – ahead of Germany, Japan, the UK and the US. Policy institutes also give Australia high marks for our business environment. This includes labour regulation, equal opportunity legislation and access to credit.

One other factor draws in workers from around the world – our lifestyle. Australia’s state capitals are renowned as some of the world’s most liveable cities. But they are also affordable. On global cost-of-living indices, Sydney, Melbourne and Perth rank far below Hong Kong, Tokyo, Shanghai, Singapore, New York, London, Los Angeles and San Francisco. We attract global talent looking for fresh opportunities. And many of them choose to stay.

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Lifestyle cities that are global drawcards

Australian cities have become more internationally competitive for expatriates. All of Australia’s state capitals have a low cost of living compared to most major cities in the Asia–Oceania region, according to Mercer’s 2021 Cost of Living Index. This makes Australia a cost-competitive destination for international companies that want to relocate employees and their families. Australian cities are also attractive to young workers who want to broaden their horizons.

Austrade-BM-cost-of-living-city-rankings-in-asia-and-rest-of-world

Notes: 1. The Mercer Cost of Living Index compares the cost of living across more than 400 cities around the world.  
Sources: Mercer, 2021, Cost of Living Index; Austrade

The fifth most valuable pension system in the world

Australia’s compulsory superannuation system has helped create the world’s fifth largest pension market, worth A$3 trillion (US$2 trillion) in 2020. Australian pension funds also experienced one of the highest growth rates of pension fund assets in the world. Assets rose to 175% of GDP in 2020 – up from 70% in 2000 – representing an annual growth rate of 11.3% in US dollar terms. Rapid growth reflects the vitality of Australia’s pension system, a major driver of the country’s fast-expanding managed funds industry.

Austrade-BM-global-pension-fund-assets-2020

Notes: 1. The assets/GDP ratio for individual markets is calculated in local currency terms, and the total assets/GDP ratio is calculated in US$. Note that the ratio of total pension assets to GDP declined from 2016 with the addition of China. China’s pension assets represent about 1.5% of total GDP. 2.Only includes autonomous pension funds. It does not consider insurance companies assets. 3. Includes Individual Retirement Accounts (IRAs). 4.Does not include the unfunded benefit obligation of corporate pension plans (account receivables). 5.Only includes pension assets for company pension schemes. 6.Only includes pension assets from closed entities. 7.Only includes Enterprise Annuity assets.
Sources: Willis Towers Watson, 2021, Thinking Ahead Institute and secondary sources, Global Pension Funds Assets Study; Austrade

Good governance, strong institutions and the rule of law

Australia is founded on strong institutions. Our regulatory environment, rule of law and lack of corruption are all highly rated in World Bank rankings. In Australia, fair and effective governance is seen as the foundation for economic growth and a free society. Good governance generates confidence among major investors. It also makes Australia a secure base for multinationals that want to expand or set up new operations in the Asia-Pacific region.

Worldwide governance indicators, 2021¹

Economy Voice and accountability Political stability and absence of violence/terrorism Government effectiveness Regulatory quality Rule of law Control of corruption
New Zealand 99.0 97.6 92.8 99.5 99.0 98.6
Norway 100.0 94.3 98.6 95.7 99.5 97.6
Switzerland 98.6 93.4 99.5 93.8 97.6 97.1
Finland 99.5 82.1 99.0 99.0 100.0 99.5
Luxembourg 96.6 93.9 97.1 98.6 95.7 96.6
Denmark 97.6 81.6 98.1 97.6 98.1 100.0
Sweden 97.1 85.4 95.7 95.2 96.6 98.1
Canada 96.1 90.1 94.2 94.2 92.8 91.8
Netherlands 98.1 74.1 97.6 96.6 94.7 96.2
Australia 93.2 73.1 93.8 98.1 92.3 93.8
Austria 95.7 74.5 94.7 90.9 97.1 90.9
Ireland 95.2 83.0 90.9 91.8 90.4 91.3
Singapore 38.2 97.2 100.0 100.0 98.6 99.0
Germany 94.2 68.9 88.9 93.3 91.3 95.2
Japan 79.7 87.3 93.3 89.4 90.9 90.4
UK 89.4 61.3 89.4 92.3 89.9 94.2
Taiwan 84.1 72.2 92.3 89.9 87.0 85.1
Hong Kong SAR 48.3 50.0 95.2 97.1 91.8 93.3
Korea 72.0 62.7 89.9 81.3 84.6 76.0
US 72.9 46.2 87.0 87.5 88.5 82.7
Spain 80.7 58.0 77.9 73.6 78.4 76.4
Italy 82.1 59.9 67.3 68.3 60.6 69.2
Malaysia 40.1 50.9 82.2 74.0 73.1 62.5
India 53.1 17.0 66.8 47.6 54.3 46.6
Indonesia 52.2 28.3 65.4 55.3 41.8 38.9
China 4.8 37.7 72.6 50.0 52.9 52.9
Thailand 26.1 24.5 63.5 58.7 57.7 38.5
Brazil 56.5 32.1 36.5 46.2 48.1 43.8
Vietnam 12.1 44.8 61.5 46.6 48.6 42.3
Philippines 41.1 18.9 56.3 53.4 31.7 34.1

Notes: 1. The Worldwide Governance Indicators (WGI) project reports aggregate and individual governance indicators for over 200 countries and territories over the period 1996–2020, for six dimensions of governance in the above table. These aggregate indicators combine the views of a large number of enterprise, citizen and expert survey respondents in industrial and developing countries. They are based on over 30 individual data sources. Economy scores are reported as percentile ranks, with higher values indicating better governance ratings.
Sources: The World Bank, 2021, The Worldwide Governance Indicators, 2021 Update; Austrade

Transparent regulation, open markets and efficient businesses

Australia’s pro-business environment attracts investment and encourages new businesses. According to the Institute for Management Development, Australia ranks highly in terms of labour regulations, equal opportunity legislation and access to credit. Australia has been a leader in economic freedom since the inception of the Index in 1995, and our economy has been in the highest (free) category for the past 15 years. Globally, we rank first for financial freedom, second for judicial effectiveness, and third for trade freedom.

Business efficiency and environment, 2021

  Australia US UK China India Japan Korea Singapore
The Heritage Foundation, 2021 Index of Economic Freedom(a) in:              
Financial freedom1 1 3 3 160 107 38 38 3
Judicial effectiveness 2 23 14 25 58 16 41 1
Monetary freedom2 2 47 49 152 135 11 16 8
Trade freedom3 3 49 13 89 99 49 56 1
Business freedom4 7 20 1 28 37 9 5 2
Labour freedom5 8 3 35 63 167 14 112 1
Property rights 9 22 25 58 65 5 39 4
Government integrity 10 21 13 75 64 16 28 5
Non-performing loans % of gross total loans 10 14 8 26 106 15 3 6
IMD World Competitiveness Yearbook 2021 Ranking(b) in:              
State ownership of enterprises is not a threat to business activities 3 13 9 42 27 17 55 24
Labour regulations do not hinder business activities 5 13 9 25 38 40 45 6
Unemployment legislation provides an incentive to look for work 5 25 8 20 35 32 15 1
Bureaucracy does not hinder business activity 7 17 15 24 25 23 58 3
Equal opportunity legislation encourages economic development 8 22 17 19 26 20 41 6
Credit is easily available for business 9 1 10 38 37 21 41 16
Environmental laws & compliance hinder business competitiveness 10 25 13 19 53 11 41 6

Notes: 1. Financial freedom is an indicator of banking efficiency as well as a measure of independence from government control and interference in the financial sector. 2. Monetary freedom score is based on two sub-factors: The weighted average rate of inflation for the most recent three years and a qualitative judgement about the extent of government manipulation of prices through direct controls or subsidies. 3. Trade freedom is a measure of the extent of tariff and nontariff barriers that affect imports and exports of goods and services. 4. Business freedom measures the extent to which the regulatory and infrastructure environments constrain the efficient operation of businesses. 5. Labour freedom is based on various aspects of the legal and regulatory framework of a country’s labour market, including regulations concerning minimum wages and laws inhibiting layoffs.

Sources: 6. The Heritage Foundation, 2021, Index of Economic freedom; 7. Institute for Management Development (IMD), 2021, World Competitiveness Yearbook 2021; Austrade