Australia needs a complex economy 'to ensure future growth and reduce vulnerability to foreign powers,' report says
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Los Angeles/DNA (ots)
Australia boasts some of the world's most sophisticated political institutions and one of its wealthiest economies. But a "ticking time bomb" of overreliance on extractive industries must be addressed under Australia's next government, a new report recommends.
The country's current development is resulting in "rising political polarization, deepening inequality and heightening exposure to the deeper geopolitical tensions emerging between the U.S. and China," according to an Australia BGI Report on the country's governance performance, released eight days before the May 3 election.
Based on the Berggruen Governance Index (BGI), the report was conducted by researchers from the Los Angeles-based Berggruen Institute think tank, the Luskin School of Public Affairs at the University of California Los Angeles (UCLA) and the Hertie School, a German university.
According to the report, Australia has long benefited from favourable economic, geopolitical and demographic conditions, scoring highly on almost all governance measures in the BGI. But cracks are starting to show.
Eroding public trust in government is providing "the backdrop for a hotly contested federal election," during which the centre-left Labor Party is seeking to defend its majority against the centre-right Liberals.
While the Labor Party was previously projected to lose after a lacklustre post-pandemic economic recovery, it has recently risen in the polls - a reversal mirroring a similar trend in Canada, in which U.S. President Donald Trump has amplified negative associations with conservatism. Now, the Australian Labor Party is projected to win by a slim margin.
However, the stresses that have plagued the Labor Party "will persist regardless of who prevails in May," said the Australia BGI Report.
Despite ranking 9th globally in GDP per capita, Australia ranks only 99th worldwide in the Economic Complexity Index (ECI).
"Its reliance on extractive industries has reduced the incentive to diversify and weakened other parts of the economy," said the report. Iron ore, coal, petroleum, gold, and other minerals comprise the five largest products sold abroad, accounting for more than half of all exports.
Instead of moving away from this reliance, "Australia has in many ways doubled down." And one of its biggest customers is China.
While Australia is increasingly economically dependent on China, it's also long relied on the U.S. security guarantee. In the context of a growing U.S.-China rivalry, this puts Australia in a precarious position.
Only with a more complex economy, the report said, "can Australia ensure future growth and reduce vulnerability to foreign powers like China and the U.S."
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