IAREM 2023: Norway's 'mixed' economy leads as Australia plays catch up

The Independent Australia ranking on economic management (IAREM) for 2023 shows Norway leading the world while Australia’s climb up the global ladder has begun. Alan Austin reports.

NORWAY IS unique among major developed economies having decided some decades ago to keep the profits from its energy exports in the country. The great wealth now generated from Norway’s North Sea oil and gas rigs goes into a sovereign wealth fund instead of being sent offshore via multinational corporations.

Consequently, the nation’s assets vastly outweigh its public debt. This is one factor underpinning Norway’s rise to the top of this year’s IAREM: the Independent Australia ranking on economic management. There are others.

Reaching the pinnacle has taken some time. Norway has been in the top ten economies for most years since the first IAREM rankings were assembled in 2007. Norway ranked second in 2009 and 2013, third in 2015, fourth in 2012 and 2019, but only seventh last year.

Global recovery falters

This year’s rankings largely reflect how governments have handled the recovery from the COVID recession and, particularly, managed rampant inflation. These are difficult times. Of the 38 rich OECD members, only seven have avoided a negative quarter of growth in gross domestic product (GDP) since the start of 2022. They are Australia, Belgium, Canada, Mexico, Slovakia, Spain and Switzerland.

Results for 2023 confirm that nations that balance corporate freedom with sensible government oversight generate the best outcomes. These are mostly low-population nations with a culture of ingenuity and enterprise.

World’s top ten economies

In order, the best-performed economies in 2023, with IAREM scores achieved, were:

1. Norway 39.96
2. United Arab Emirates 39.88
3. Singapore 35.60
4. Switzerland 35.02
5. Denmark 30.00
6. Iceland 29.60
7. Luxembourg 29.29
8. Ireland 28.60
9. Cyprus 26.95
10. Israel 26.56

The next ten, in order, were South Korea, Hong Kong, Australia, Netherlands, Canada, Oman, Saudi Arabia, the United States, Iraq and Panama. Most of these controlled inflation and enjoyed strong economic growth and demand for jobs.

The top 30 are listed in the table below, with all IAREM components shown.

IAREM to 30 2023 D.jpg

The IAREM score

The Independent Australia ranking on economic management is a composite index that measures all the world’s economies on eight indicators. These are national income per person, GDP growth, median wealth per adult, jobs, inflation, tax levels, government net debt and economic freedom. This transparent formula can easily be replicated with basic spreadsheet software:

IAREM = ip + gr + mw + j – in – t – gd + ef

Data comes from publicly accessible tables published by the World Bank, Credit Suisse, Heritage Foundation, the International Monetary Fund and tradingeconomics.com. This is the world’s only index of overall economic performance based on multiple variables.

Norwegian ascendancy

Norway’s economic growth has never been among the OECD’s strongest, but has seldom been negative. Annual GDP growth for the last two years has averaged just 3.51%. That’s relatively modest – nowhere near Greece’s 8.1% or Ireland’s 11.3% – but quite sustainable.

Its jobless rate has been among the lowest for decades now, falling to 3.1% in several months recently, close to the all-time low.

Inflation increased in 2021 along with the rest of the world, but peaked at a relatively benign 7.5% in October last year. That beats Sweden, Belgium, Poland, Chile, Latvia and the Netherlands which all copped inflation highs last year above 12%.

According to Credit Suisse’s annual global wealth report, Norway’s average wealth per person was US$385,338 in 2022. That ranks eighth in the world, behind Australia, Denmark, Iceland, Luxembourg, New Zealand, Switzerland and the USA.

Just three years ago, pre-COVID, the mean wealth of Norwegians was just US$280,227 (AUD$437,574), which ranked a modest 16th.

Australia’s slow rise underway

Australia ranks 13th this year, up from 22nd last year and a dismal 28th in 2019. Australia’s score improved with unemployment this year being the lowest on record. Economic growth is now lower than last year as a percentage of GDP, but higher relative to the rest of the world. Australia’s 2023 second-quarter annual growth rate was a modest 2.27%, but due to deteriorated global conditions, this ranked tenth in the OECD.

Australia’s budget deficits and government debt have vastly improved since the Coalition was banished in May last year. Over the 12 months from June 2022 to June 2023, the Albanese Government reduced Australia’s gross debt by $5.46 billion. That contrasts with previous Coalition governments which increased the debt over the eight preceding financial years by an average of $72.0 billion per year. Those destructive days appear gone forever.

The value of a degrowth economy: Our planet would be richer for it

Decades of economic expansion have come at the expense of developing nations and a tremendous cost to the planet. Degrowth is a healthier future option.

Other winners in the 2023 rankings

The USA demonstrated its continuing recovery from the disastrous Trump era by jumping from 41st to 18th, mainly on low inflation, strong GDP growth and controlled borrowings. Canada also surged from 39th to 15th.

European countries to impress include Iceland, up from 14th to sixth, Cyprus up from 44th to ninth and Spain up from 57th to 36th.

Asia Pacific winners included Hong Kong up from 48th to 12th, New Zealand up from 29th and 22nd and Thailand up from 45th to 25th.

The big losers of 2023

Economies tumbling down the IAREM rankings over the last year include several surprises, mostly resulting from persistent inflation and negative growth. Ireland fell from third to eighth, Taiwan from sixth to 23rd, Germany from 17th to 32nd and China from 28th to 52nd.

These confirm the old Norwegian saying – Lykke gir aldri, det bare låner ut – good fortune is loaned, not owned.