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Australia’s losing the global competitiveness competition

The World Economic Forum’s (WEF) “2013-2014 Global Competitiveness Report is out, and Oz ain’t what it used to be.

According to the report, “A country’s competitiveness is widely accepted as the key driver for sustaining prosperity and raising the wellbeing of its citizens. Enhancing competitiveness is a long-term process that requires improvement across many areas as well as long-lasting commitments from relevant stakeholders to mobilize resources, time, and effort.”

The report looks at institutions (mostly government), infrastructure, macroeconomic environment, health and primary education, higher education, market efficiency, labour markets, financial markets, economies of scale, business operations, and innovation as key “pillars” of a country’s competitiveness. For a developed country like Australia, its edge lies most solidly in the last two pillars.

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Source: WEF

Unfortunately for Australia, its edge dulled slightly in this latest report. At an overall level, Oz eased back to 21st place from 20th place in the previous report. Adding insult to injury, New Zealand leaped ahead of Australia — from its laggard 23rd position to 18th this year. Switzerland, Singapore, and Finland took gold, silver, and bronze (respectively).

While Oz stacked up nicely on basic requirements and efficiency enhancers, it clocked in at 26th place for innovation and sophistication factors. Business sophistication proved the main drag, signalling a less-than-competitive edge in terms of networks and operational efficiencies.

As a bright spot on a dark report, Australia did manage to make top 10 on the financial market development pillar. Its seventh place finish is to be commended, as its 15th place higher education rank. Oz also got brownie points on its macroeconomic situation (25th place) for keeping inflation below 2% and having the third-lowest debt-to-GDP ratio among developed countries. But government got slammed on its rigid regulatory environment, all the way down at 128th place.

Foolish takeaway

Global reports like this one are important – but not too important. There’s a whole world of investing out there, and sticking with a country that’s stuck in the mud is hardly a wise decision. Multinationals are globalizing faster than ever before, and Australia’s corporations lose their competitive edge when HQ is hindered.

But even as Australia’s rank slid this year, these national numbers are nothing more than, well, numbers. Oz still ranks competitively on almost every indicator, and innovative companies with a competitive edge need not worry about country-level comparisons.

Wise investors should do the same. Investing in “Australia” isn’t just impossible, it’s a bad idea. Picking sustainable winners with sector-wide competitiveness is the key to long-lasting profit, and The Motley Fool is here to help you every step of the way.

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Motley Fool contributor Justin Loiseau has no position in any stocks mentioned in this article. You can follow him on Twitter @TMFJLo.

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