Just as England was known as “the land without music” in Europe early last century, so Australia is on track to being known as the land without competitiveness in Asia this century.
Eight of Australia’s top 10 trading partners on a two-way basis (exports plus imports) are Asia-Pacific countries. In order of importance they are China, Japan, the US, South Korea, Singapore, New Zealand, Malaysia and Thailand. All these economies, except China, outperform Australia in the World Economic Forum’s latest Global Competitiveness Index rankings, as do Australia’s only two European top 10 trading partners, Britain and Germany. The areas where Australia ranks worst are the macro-economic environment, including the budgetary position, and goods and labour market efficiency.
The biggest competitiveness gap between Australia, ranked 21 on the WEF measure, and any of its top 10 trading partners is with Singapore, ranked second in the world for competitiveness after Switzerland. Because of its small size, dependence on trade, high living standards and cosmopolitan nature, Singapore is considered, not surprisingly, “the Switzerland of the East”. It is also the second safest city in the world to live in, after Tokyo, according to The Economist. Singapore is the most open economy in the world and is first globally in the World Bank’s ease of doing business index, as against Australia’s 13th rank.
Its literacy and numeracy standards are world-beating at primary and secondary level, and at tertiary level the National University of Singapore easily outranks any Australian university in world league tables. Its second university, Nanyang Technological University, regularly ranks first or second annually in the world’s best universities under 50 years old.
Yet government spending on education as a proportion of gross domestic product is significantly less in Singapore than in Australia, according to UNESCO data. In 2013 it was under 3 per cent for Singapore and more than 5 per cent for Australia. This implies higher government spending on education does not necessarily translate to higher educational achievement.
Though the competitiveness gap between Australia and Singapore is sizeable, nonetheless the Australian economy has benefited indirectly from Singapore’s success because its economic performance has provided a model for other economies in the region, most notably China and India.
A visit to Singapore by Chinese leader Deng Xiaoping in 1978 famously inspired economic reforms in China that sparked phenomenal growth and led to China becoming the second largest economy and Australia’s major trading partner.
Indian Prime Minister Narendra Modi has been an admirer of the Singapore economic model since his time as chief minister of Gujarat. He has substantially bolstered India-Singapore economic ties and tapped into Singapore’s expertise in high technology and urban planning to sustain India’s growth, now higher than China’s, with further indirect trade benefits for Australia.
What resource-rich Australia, along with Canada, does have in common with resource-deprived Singapore is a AAA credit rating, the only Asia-Pacific economies with this status. Singapore’s AAA credit rating reflects decades of political stability and sound fiscal management by governments of the People’s Action Party founded by Lee Kuan Yew, prime minister for 25 years. Compared with Australia’s five prime ministers across the past decade, Singapore has had three since independence more than five decades ago.
Government spending as a share of Singapore’s GDP is just 20 per cent, its top marginal tax rate is 20 per cent, and there is a constitutional requirement that annual budgets be balanced. According to International Monetary Fund data, the share of total government spending as a proportion of Singapore’s GDP fell after the global financial crisis. In contrast, Australia’s total government spending as a share of GDP is about 3 per cent higher than before the financial crisis at 37 per cent, nearly double Singapore’s.
As a resident of Singapore last year, I witnessed the nation’s 50th anniversary celebrations of independence and its most recent election. That election, indisputably free and fair, resulted in a swing towards the ruling PAP government, which attracted close to 70 per cent of the vote. This outcome undoubtedly reflected the electorate’s gratitude for 50 years of pro-growth policies that transformed Singapore from a Third World to a First World economy in a generation.
Throughout last year’s election the Singaporean government campaigned heavily against the main opposition parties — the Workers Party and Singapore Democratic Party — on the theme of the unsustainability of their fiscal policies. The government argued that excessive growth in public outlays and fiscal deficits in the European, and now Australian, tradition would put Singapore on the path to fiscal ruin.
In contrast, Australia has both sides of politics ill-advisedly accepting continuing budget deficits and rising public debt at great risk to the AAA credit rating, demonstrating that Singapore also outranks Australia in economic literacy.