2013 Index of Economic Freedom

Australia

overall score82.6
world rank3
Rule of Law

Property Rights90.0

Freedom From Corruption88.0

Limited Government

Government Spending62.8

Fiscal Freedom66.4

Regulatory Efficiency

Business Freedom95.5

Labor Freedom83.5

Monetary Freedom83.8

Open Markets

Trade Freedom86.2

Investment Freedom80.0

Financial Freedom90.0

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Quick Facts
  • Population:
    • 22.7 million
  • GDP (PPP):
    • $914.5 billion
    • 2.0% growth
    • 2.6% 5-year compound annual growth
    • $40,234 per capita
  • Unemployment:
    • 5.1%
  • Inflation (CPI):
    • 3.4%
  • FDI Inflow:
    • $41.3 billion
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Australia’s economic freedom score is 82.6, making its economy the 3rd freest in the 2013 Index. Its overall score is 0.5 point lower than last year, with score gains in freedom from corruption and business freedom offset by declines in labor freedom and the management of government spending. Australia is ranked 3rd out of 41 countries in the Asia–Pacific region, and its score is well above the regional and world averages.

Australia’s strong commitment to economic freedom has resulted in a policy framework that encourages impressive economic resilience. A well-functioning independent judiciary ensures strong protection of property rights, and corruption is minimal. Openness to global trade and investment is firmly institutionalized, and the economy has rebounded relatively quickly from the global recession.

The financial system has remained stable, and prudent regulations have allowed banks to withstand the global financial turmoil with little disruption. Public finances are soundly managed, and sovereign debt levels are under control. A transparent and stable business climate makes Australia one of the world’s most reliable and attractive environments for entrepreneurs.

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Background

Australia is one of the world’s least densely populated countries and one of the most urbanized, with most of the population concentrated in coastal cities. Since the early 1980s, successive Labor and Liberal governments have deregulated financial and labor markets and reduced trade barriers. Prime Minister Julia Gillard, leader of the Labor Party, heads a minority government in a closely divided parliament. Australia is one of the Asia–Pacific’s richest countries and has enjoyed economic expansion for over two decades. It came through the global recession relatively unscathed, but stimulus spending by the Labor government has led the country into deficit. Passage of a carbon tax raises doubts about future growth prospects. Australia is internationally competitive in services, technologies, and high-value-added manufactured goods. Exports remain heavily focused on mining and agriculture.

Rule of LawView Methodology

Property Rights 90.0 Create a Graph using this measurement

Freedom From Corruption 88.0 Create a Graph using this measurement

Australia’s judicial system operates independently and impartially. Property rights are secure, and enforcement of contracts is reliable. Expropriation is highly unusual. Protection of intellectual property rights is consistent with world standards. Effective anti-corruption measures discourage bribery of public officials and reinforce a tradition of clean government.

Limited GovernmentView Methodology

Fiscal policy has been relatively stable. The top income tax rate is 45 percent, and the flat corporate tax rate is 30 percent. Other taxes include a value added tax (VAT) and a capital gains tax. The overall tax burden is equivalent to about 26 percent of GDP. A new carbon tax ensures escalating prices over three years. Government spending amounts to 35.2 percent of total domestic output. Public debt remains low but has risen to 24 percent of GDP.

Regulatory EfficiencyView Methodology

Australia’s regulatory environment, one of the world’s most transparent and efficient, is highly conducive to entrepreneurship. It takes only two days to launch a business. The labor market remains flexible, and unemployment is a relatively low 5 percent. Modest inflation allows the Reserve Bank of Australia flexibility to adjust interest rates. Reforms are reducing the range of goods that are subject to price controls.

Open MarketsView Methodology

Tariffs are low as a result of negotiated trade agreements and unilateral tariff cuts. Foreign and domestic investors receive equal treatment, but foreign investments above a certain threshold may be screened. The well-developed financial sector is highly competitive and sound; all banks are privately owned. Since late 2010, banking reforms have fostered transparency and competition in the sector.

Country's Score Over Time

Bar Graph of Australia Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Australia to other economic country groups

Regional Ranking

rank country overall change
1Hong Kong89.3-0.6
2Singapore880.5
3Australia82.6-0.5
4New Zealand81.4-0.7
5Taiwan72.70.8
6Japan71.80.2
7Macau71.7-0.1
8South Korea70.30.4
9Malaysia 66.1-0.3
10Thailand 64.1-0.8
11Kazakhstan63-0.6
12Mongolia61.70.2
13Sri Lanka60.72.4
14Azerbaijan59.70.8
15Kyrgyz Republic 59.6-0.6
16Cambodia58.50.9
17The Philippines58.21.1
18Fiji57.2-0.1
19Samoa57.1-3.4
20Indonesia56.90.5
21Vanuatu56.60.0
22Tonga56-1.0
23India55.20.6
24Pakistan 55.10.4
25Bhutan55-1.6
26Papua New Guinea53.6-0.2
27Tajikistan53.40.0
28Bangladesh 52.6-0.6
29China51.90.7
30Vietnam51-0.3
31Nepal50.40.2
32Micronesia50.1-0.6
33Laos50.10.1
34Maldives49-0.2
35Uzbekistan460.2
36Kiribati45.9-1.0
37Solomon Islands45-1.2
38Timor-Leste43.70.4
39Turkmenistan42.6-1.2
40Burma39.20.5
41North Korea1.50.5
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