Australia ahead of New Zealand in Economic Freedom

17 January 2007

Australia Overtakes New Zealand in Economic Freedom Rankings

“An interesting feature of the 2007 Heritage Foundation/Wall Street Journal Index of Economic Freedom just released is that for the first time in many years Australia, at 3rd place, outranks New Zealand, at 5th place, in the rankings for economic freedom”, Roger Kerr, executive director of the New Zealand Business Roundtable, said today.

In last year’s index both countries were in 9th equal place and have risen because Ireland, Luxembourg, Iceland, the United Kingdom, Estonia and Denmark have fallen in the rankings. New Zealand enjoyed third placing in the 1990s.

The index grades countries on a combination of factors including property rights protection, tax rates, government intervention in the economy and monetary, fiscal and trade policy.

It is of interest because of the evidence that economically free countries enjoy significantly greater prosperity than those burdened by heavy government intervention, such as high levels of government spending, taxation and regulation. The per capita GDP of the top quintile of countries, ranked according to economic freedom, is now almost US$28,000 while that of the bottom quintile is less than US$5,000.

This year’s report contains two interesting essays, one of which destroys the myth that world income inequality is growing and the other discusses the costs of low growth and unemployment associated with restrictions on labour market freedom.

“Economic freedom should be a lodestar of policies for growth”, Mr Kerr said. “The 2007 Index is largely based on 2005 data. Since then Australia has continued with policies such as deregulation, privatisation and tax reductions whereas government intervention in New Zealand has increased. This seems likely to be reflected in future index rankings and in the two countries’ future growth rates and income levels.”

ENDS

© Scoop Media