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Australia is the best country for growing businesses, according to the second annual Grant Thornton Global Dynamism Index (GDI) released this week. Australia climbed to the top of the ranking of 60 of the largest economies in the world this year, up from seventh place in 2012. Also rounding out the top ten countries were Chile, China, New Zealand, Canada, Finland, Singapore, Israel, Sweden and Norway.
“Political campaigning and doomsday debate aside, the fact is Australia has a lot to offer international businesses planning to expand into Asia Pacific. Not just 22 years of unbroken economic growth, but also strong institutions, skilled, productive people and a strong culture of investment in R&D,” said Grant Thornton CEO Robert Quant.
However, Mr Quant is quick to explain this is not just simply a matter of trumpeting Australia as the 'best place to do business' in the world.
“We need to be clear on what the index is showing. The GDI measures changes to each economy over the course of last year which made them a better (or worse) place to do business - it is a relative rather than an absolute measure. Australia's business growth environment improved more than any other in 2012. This places us above China, the US, Japan, and well above the UK,” said Mr Quant.
While Australia did not rank first on any individual measure, strong ratings across the board and key drivers such as labour productivity (2.6%) and real GDP (3.6%) growth are behind the rise.
“These are not increases to compete with China by any stretch of the imagination, but they are very strong by advanced economy standards. When combined with sound business growth infrastructure, and the fact that Australia ranks high for the dynamism of its business operating and financing environments – you are left with a very competitive economy.”
According to the index, this is largely borne out of the latest investment statistics. Australia attracted US$57bn of foreign direct investment (FDI) in 2012, the seventh highest level globally, outdoing its relative size as the world's 12th largest economy. Moreover, stocks of FDI have increased by 12% per annum on average over the past decade, rising far faster than the US (5%), France (6%), Germany (7%) or the UK (8%).
“Of course, much of this investment has been in the mining sector and the demand for commodities might well have reached its peak, especially from China which is slowing.
“More than a quarter of Australia's exports go to China so the key for Australia is to move beyond the mindset of 'digging stuff up and selling it to China’ being meaningful engagement with the region. The burgeoning middle classes in Asia offer a huge potential market for advanced goods and services such as banking, education, healthcare and tourism, particularly those in Australia’s middle market segment.
“These are the companies that are set for growth, and who will be the next growth engine of our economy. China alone has 1.3bn people. Even if you target just 5% of the population, you have a market larger than France or the UK. No growing business can afford to walk away from that!” said Quant.
Rankings - Australia
The ratings go beyond basic GDP data, looking also at five areas. These were identified as the key drivers to an economy’s dynamism: business operating, environment, science and technology, labour and human capital, economics and growth and the financing environment. Within these groups, there were 22 key data points that were analysed.
More than 400 senior executives from a broad range of countries and industries were then interviewed to determine which aspects of these attributes they deemed most important for business growth. This allowed for the weighting of each aspect according to its perceived relevance. The rankings indicate which economies have the most dynamic business growth environments, where dynamism refers to the changes in an economy which are likely to lead to a faster future rate of growth.
Global rankings - Overall
(Complete list of 50 countries available here:http://www.gti.org/thinking)
Business operating environment
(Foreign trade and exchange regimes and controls; policy towards private enterprise and competition; political stability; and legal and regulatory risk)
Science and technology
(Broadband subscriber lines per 100 inhabitants; growth in broadband subscriber lines; R&D as % of GDP; total IT spending growth)
Labour and human capital
(Labour productivity growth; unemployment; school life expectancy; % of population under 30.)
Financing environment
(Quality of overall financial regulatory system; access of firms to medium-term capital; growth in value of inward M&A deals; value of inward M&A deals; private sector credit as % of GDP; inward direct investment growth; corporate tax burden.)
Economics and growth
(Real GDP growth; private consumption per head; change in $ value of stock market index.)
-ends-
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Notes to editors
To find out more about the GDI, go to www.gti.org/thinking
Indicators: Categories and indicators were selected on the basis of expert analysis by the Economist Intelligence Unit (EIU). Indicators are drawn from a variety of sources, including: the EIU, the World Bank, Thomson Financial and UNESCO.
Survey: The survey of 406 senior executives was conducted by the Thought Leadership team at the EIU. All respondents held C-Suite, board roles or other senior decision making roles in a wide variety of sectors and geographical regions. Around half were drawn from businesses with global annual revenues exceeding $500m. Survey respondents were asked to assign an importance to each of the indicators for their company
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