November 1, 2000 | News Releases on Foreign Aid and Development
Australia tied for ninth place with Bahrain and Switzerland. Within the Asia-Pacific region, Australia ranks fourth, behind Hong Kong, Singapore and New Zealand, which are three of the freest economies in the world, according to the Index.
"The countries with the most economic freedom also have higher rates of economic growth and are more prosperous than are those with less economic freedom, and the experience of Australia certainly proves that," note Index editors Gerald P. O'Driscoll Jr., director of Heritage's Center for International Trade and Economics, Kim R. Holmes, a Heritage vice president and director of the think tank's Davis International Studies Center, and Melanie Kirkpatrick, assistant editorial page editor of The Wall Street Journal.
The Index findings will be presented in Canberra on Nov. 3 by Edwin J. Feulner, president of The Heritage Foundation; O'Driscoll; Heritage Policy Analyst Denise Froning; and Kenneth Sheffer, head of Heritage's Hong Kong office.
Australia has thrived in recent years, the editors say. It has privatized its retirement system, and it has ended state control over a number of sectors. It has also deregulated its banking system and opened its domestic airline industry to competition. Its citizens continue to enjoy a high level of real GDP per capita. Its economy has grown at an average annual rate of 3.1 percent throughout the 1990s, while maintaining low rates of inflation.
Australia's Index score remains the same in the latest edition, but the editors say that, provided no negative policy changes take place, it could rise next year as a result of two key economic reforms that were enacted on July 1 (the day after the Index cut-off date of June 30): It cut income tax rates so that 80 percent of Australians are taxed at a rate of 30 percent or less, and it deregulated its dairy industry.
Australia remains a country to watch, the editors say. It has been listed as an economically "free" country in the last four editions of the Index. Australia first cracked the top 10 freest economies in the 2000 Index when it wound up in a tie with Switzerland and the United Kingdom for eighth place.
Regionally, Hong Kong retained its No. 1 ranking. Government spending rose in this "Special Administrative Region" of the People's Republic of China, but inflation declined, allowing its Index score to remain the same. Singapore held on to the No. 2 spot, but its overall score declined.
Asia and the Pacific was once again the most "schizophrenic" region, with four of the world's freest economies and six of the most repressed- Vietnam, Burma, Turkmenistan, Uzbekistan, Laos and North Korea. Only nine countries became freer, 17 more repressed. Yet the single biggest improvement in economic freedom occurred in this region, as lower inflation, less government spending and reduced tariffs brought Thailand up from 46th to 27th place.
The Index ratings reflect an analysis of 50 different economic variables, grouped into 10 categories: banking and finance; capital flows and foreign investment; monetary policy; fiscal burden of government; trade policy; wages and prices; government intervention in the economy; property rights; regulation; and black-market activity. Countries are rated one to five in each category, one being the best, five the worst. These ratings are then averaged to produce the overall Index score.
Over the years, the Index of Economic Freedom has emerged as a reliable indicator of national prosperity. The report notes a strong relationship between economic freedom and per capita income. World Bank data show that per capita income for "mostly unfree" or "repressed" economies averaged about $2,800 in 1998-a figure that quadruples to $11,054 for "mostly free" economies and doubles again (to $21,206) for "free" economies. "Countries with the most economic freedom also have higher rates of economic growth and are more prosperous than those with less economic freedom," the editors observe.