Australia falls down the World Competitiveness Rankings
Australia’s worsened competitiveness reflects lower economic growth and productivity challenges, requiring urgent action by both government and businesses.
The International Institute for Management Development (IMD) published their 2025 World Competitiveness Rankings in June. This year’s ranking comprises 69 countries, ranking their capabilities to create and sustain an environment conducive to the competitiveness of enterprises, with a particular focus on four key factors: economic performance, government efficiency, business efficiency, and infrastructure.
This year, Australia placed 18th - a drop of five places from 13th in 2024 but otherwise similar to Australia’s ranking from previous years. Australia’s worsened performance reflects weaker economic performance and significantly lower business efficiency, highlighting the need for government and business to address Australia’s chronic productivity challenges.
Australia’s overall rank for economic performance fell from 7th (2024) to 16th (2025). Real GDP growth per capita was adversely impacted by persistently low economic growth and simultaneously high population growth relative to that of other countries. As a result, Australia’s real GDP per capita growth rate fell from 20th in 2024 to 60th this year. Other areas where Australia ranks comparatively poorly include ‘office rents’ (61st), ‘dwelling costs’ as measured by apartment rents (57th), and ‘household consumption expenditure as a proportion of GDP’ (45th).
Perhaps the most concerning aspect of Australia’s international competitiveness is business efficiency, which reflects factors including productivity, management practices and domestic labour markets. Australia’s overall business efficiency ranking dropped significantly from 22nd (2024) to 37th (2025). ‘Entrepreneurship’ and the ‘agility of domestic companies’ were key areas of relative weakness, with Australia ranking 68th and 65th respectively. On the productivity and efficiency front, ‘perceptions of workforce productivity’ fell to 60th and ‘perceptions of the efficiency of large corporations’ remained low at 62nd.
In a further sign of Australia’s productivity issues, Australian companies’ ‘use of digital tools and technologies’ was ranked 54th. Low levels of digital adoption among Australian businesses were echoed in Deloitte’s 2025 CFO Sentiment Report survey of 61 Chief Financial Officers (CFOs) of major Australian-listed companies. Deloitte found that just 3% of companies were currently using AI or GenAI extensively across their organisation, with 80% reporting “pockets of use”. With AI holding the potential to provide large efficiency benefits to business operations, it is clear that some Australian companies are currently missing out. This also reinforces the importance of the upcoming Economic Reform Roundtable in August to help drive productivity.
However, it is not all doom and gloom for Australia. Australia maintained its number 1 ranking for the ‘country’s credit rating’ and having a ‘freely elected government’. Similarly, Australia recorded considerable improvements in some aspects of the domestic economy, particularly easing ‘consumer price inflation’, ‘exchange rate stability’, and ‘long-term employment growth’. Australia also performed strongly in some broader measures such as ‘life expectancy at birth’ (5th), ‘university education’ (6th), ‘corporate debt’ (11th), and ‘access to financial services’ (14th).
This newsletter was distributed on 24th July 2025. For any questions/comments on this week's newsletter, please contact our authors:
This blog was co-authored by Nathaniel Deitch, Graduate Economist at Deloitte Access Economics
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