Australia's Investment Competitiveness Declines
Australia currently ranks 21st out of 42 countries in the Business Council of Australia's Global Investment Competitiveness Index. The report indicates Australia is at risk of falling behind competitors without efforts to simplify regulations and lower investment taxes.
While Australia placed second for trade openness, it ranked near last for regulatory burden and business tax. Bran Black, chief executive of the Business Council, stated that Australia's prosperity relies on foreign capital and emphasized the need to outpace competitor countries, citing Australian job reliance on investment.
Key Findings and Reform Calls
- The ranking compiles data from organizations such as the OECD and World Bank.
- The Business Council advocates for crucial reforms:
- Reducing regulatory compliance costs.
- Increasing employer flexibility in workplace negotiations.
- Lowering corporate tax (either by cutting the 30% rate or offering larger deductions).
Mr. Black highlighted an Australian Institute of Company Directors figure indicating businesses pay $160 billion annually to comply with federal regulations, suggesting a 25% reduction target by 2030.
Countries consistently performing well combine competitive tax settings, simpler regulation, strong institutions, and high-performing labor markets. Examples include Finland, Sweden, Ireland, the US, UK, Canada, and New Zealand.
Australia's ranking has declined from 17th in 2019 to 21st in 2025 based on the same measures.
Government Actions and Tax Proposals
Australia's strong performance in trade is attributed to low tariffs and a lack of trade barriers. The government has been commended for removing numerous tariffs, reinforcing its reputation as an open trading partner.
Additionally, reforms to the environmental approvals framework were passed last year to accelerate construction project applications. A $900-million fund for states and territories supports productivity-boosting policies, and improvements have been noted in foreign investment proposal processing.
Various tax reform proposals have been put forward by key organizations:
- Business Council of Australia: Proposed making capital spending fully deductible as an alternative to a corporate tax rate cut.
- Productivity Commission: Suggested a new "cashflow" tax, rewarding capital spending but increasing charges otherwise. This proposal also considered raising the rate to 35% for larger businesses while cutting it to 20% for others.
- Australian Chamber of Commerce and Industry: Recommended a universal corporate tax rate cut to 25% in its pre-budget submission.
- Australian Council of Trade Unions: Called for higher taxes on large companies, a halving of the capital gains tax discount, and a 25% export levy on liquefied natural gas.
Treasurer Jim Chalmers has not indicated a government position on the Productivity Commission's corporate tax proposal but has not ruled out pursuing corporate tax reforms to boost productivity.