THE LEGATUM PROSPERITY INDEX™ 2016

Bringing Prosperity to Life

Australia

Ranked 6th of 149

At a glance

Ranks

6 th on the Legatum
Prosperity Index™

15th
7th
13th
4th
8th
20th
12th
2nd
14th

SUB-INDEX RANKINGS

In the Prosperity Sub-Index rankings, Australia performs best on Social Capital and Education and scores lowest on the Safety & Security sub-index.

Visit our Rankings table to see how Australia compares to other countries.

Prosperity Gap

The ‘Prosperity Gap’ takes a country's GDP and uses it as the yardstick to measure a nation's expected Prosperity Index ranking.

Like other free, developed, liberal democracies, Australia has a sizeable prosperity surplus. However, the size of the surplus has fallen by 17% from its 2008 peak as a result of falling prosperity and increasing wealth. The biggest fall has come in Economic Quality, where the surplus has almost halved in the last decade.

Note:
In the chart above, each dot represents a country. The curve shows the general tendency with which prosperity increases as GDP per capita increases. If a country falls below the curve, then we can say that compared to all other countries, it is under-delivering prosperity for its citizens. Likewise, if a country rises above the curve, then we can say that it is over-delivering prosperity for its citizens. Learn more about the Prosperity Gap here.

Alternatively, have a look at the Prosperity Gap view on our Rankings table for a full list of countries and to see how each of them are performing on the various sub-indices.

Commentary

Australia is the only country in the top 20 that has not increased prosperity over the last ten years. Ranked 1st in the world for prosperity in 2008, Australia now lies in 6th and has slipped in rank in eight of the nine sub-indices.

That absolute prosperity as well as relative prosperity have fallen is surprising given that the country has seen one of the biggest increases in wealth within the OECD. GDP per capita has increased by over $3000 since 2007, despite strong population growth. The result is a sizeable decline in Australia’s prosperity surplus, meaning that the country delivers notably less prosperity with its wealth.

Ten year % change in real prosperity by country
Australia is the only country in the top 20 that has not increased prosperity over the last ten years.

Nevertheless, Australia remains a very prosperous nation. It has the fourth best education system in the world, with strong secondary, tertiary, and vocational education driving high levels of human capital and educational attainment. Whilst it has fallen three places since 2007, Australia still has the world’s seventh best business environment. In many ways, it has grown a better place to live, with positive changes seen in health, freedom, and crime rates.

Over the last ten years, Australia has risen five ranks to 8th in Health despite sharing the challenges of rising obesity with other developed peers. This has largely been a result of rising satisfaction among Australians with their personal health and local healthcare system.

Personal Freedom has been strengthened in real terms through growing tolerance of religious minorities within society and the recognition of same-sex relationships across Australia’s States and Territories. However, those peer countries who have legalised same-sex marriage have leap-frogged Australia in this sub-index, causing it to fall from a high of 6th in 2012 and 2013 to 12th in 2016.

Homicide and theft rates have fallen quite markedly since 2007, however the ongoing threat from terrorism exerts a downward pressure on the Safety & Security sub-index despite these improvements. The Martin Place siege saw Australia fall sharply in this sub-index in 2014 from 13th to 20th.

Despite these improvements, prosperity has still fallen. Arresting this decline is a challenge for the Liberal Government, one made harder by the drivers behind it. Much of the decline is attributable to the Economic Quality and Governance sub-indices, where protectionism is creeping in. With Australia’s economy heavily dependent on exports, the fact that the Index has recorded increasing trade barriers is a concern. So too are other economic developments, like falling economic diversity and a less flexible labour market, problematic for future prosperity growth. In Governance, variables that capture regulation and the transparency of policymaking in government are also showing negative change. This slow erosion of the strong structural foundations of prosperity growth show already when Australia is compared to developed peers. Its long-term impact has the potential to be far more drastic.


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Data

How to read this graph:
When comparing multiple countries on a spider chart, data points that appear
further away from the center represent a better performance to the points that are closer to the center.

Special Analysis

Special Analysis

OVERALL

Australia has become marginally less prosperous since 2007, the only country in the top 20 to record an absolute decline. This has seen it drop out of the top five to rank 6th in 2016. It does however remain one of the most prosperous countries in the world thanks to strong healthcare, education, and business environment.

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Areas of Success
Areas of Success

Social Capital is Australia’s strongest asset, ranking 2nd in 2016, and consistently in the top five in the last decade. Australians are among the most charitable people in the world with a strong propensity to help others. Education is a close and consistent second, ranking 4th in 2016. Here, vocational education has been strengthened, and equality is education is in the top ten. Notable improvement has come in the Health sub-index, where Australia has climbed from 13th to 8th over the last ten years. This has been achieved despite rising levels of obesity, predominantly a result of rising life expectancy and satisfaction with health and healthcare among the population.

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Areas of Little Change
Areas of Little Change

Little movement has been recorded by the Index in Australia’s two strongest areas of prosperity: Education and Social Capital. Little movement has been seen also in Personal Freedom, where Australia ranks 12th. This is despite significant improvement in the underlying score in this sub-index. This is predominantly a result of a number of peers legalising same-sex marriage, matching and exceeding much of the progress made by Australia in this sub-index.

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Areas of Improvement
Areas of Improvement

Most concerning for Australia is that absolute decline has come in the key structural foundations of prosperity growth. In the Economic Quality sub-index, Australia has fallen from 8th to 16th in the last decade. This is predominantly the result of a concerning trend towards protectionism. On trade barriers, Australia used to rank 21st in the world in 2007. In 2016, it came just 45th, behind most developed peers, and many developing nations. Its closest peer, New Zealand, ranked 4th. A similar trend can be seen in anti-monopoly policy, where Australia has fallen from 3rd to 31st.