World’s best economy: Another wipeout for Australia

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From world’s best economy in 2013, Australia fell to third last year in the IAREM global rankings. And now down to ninth. IA’s econometrics specialist Alan Austin reveals the winners and losers for 2015.

THE SURF'S definitely up. But Australia just can’t catch a wave.

In 2014, Australia fell from world’s best-performed economy on the IAREM ranking to third, behind Singapore and the United Arab Emirates. Australia had held top spot from 2009 to 2013, after managing the global financial crisis (GFC) better than most.

In 2015, the wipeout dumped Australia in ninth place, overtaken by Norway, Switzerland, Luxembourg, Oman, Taiwan and – embarrassingly – New Zealand. Coincidentally, ninth was Australia’s ranking in 2007, when Labor took the longboard from John Howard’s conservatives.

Australia’s IAREM score fell this year from 29.25 to 26.73. There was a marginal lift in income but declines in gross domestic product (GDP) growth and median wealth and a rise in government debt.

Singapore lost top spot to the United Arab Emirates. This was more attributable to UAE’s surging income, rising wealth and strong cash reserves than any notable Singaporean problem. Singapore’s score declined only slightly on higher debt and lower wealth.

Winners in 2015

Most countries achieved higher IAREM scores in 2015, confirming that recovery from the GFC is continuing worldwide. Of last year’s top 30 economies, 17 had significantly higher scores this year. Seven were lower and six about the same.

Norway advanced from ranking eighth last year to an impressive third with higher income and median wealth and much more money in the coffers or negative debt.

Clearly, the most spectacular move was New Zealand’s advance from 13th to fifth on the strength of greater median wealth, lower inflation and lower debt. Malcolm Turnbull’s plaudits for his Kiwi counterpart are well-founded.

South American economies enjoying la fiesta económica include Paraguay, Peru, Guatemala, and Bolivia. Chile, Argentina and Colombia suffered, however. So there is no obvious regional boom.

The IAREM score

The Independent Australia ranking on economic management (IAREM) is a simple linear equation, using basic arithmetic and algebra. It is easily verifiable by readers with internet access and spreadsheet software:

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

The data comes from tables published annually showing the progress citizens, governments, businesses and workers most want to see. Variables are normally numbers between 5 and +13, resulting in a score between zero and 30 for the majority of countries.

The eight variables are: Income per person (ip), GDP growth (gr), jobs to population (j) and taxation levels (t), all found at the World Bank’s databank. Median wealth (mw) is recorded by Credit Suisse’s global wealth data book 2015. Inflation numbers (in) are from tradingeconomics.com. Net government debt (nd) is found in the International Monetary Fund’s world economic outlook database. Economic freedom (ef) is from Heritage Foundation’s annual listing. Methodology details are here.

IAREM scores enable comparisons of every economy, year on year and between all countries in any given year. This is the only published ranking of economies using all eight critical measures of performance. It supplements the various credit ratings, Cato’s and Heritage’s economic freedom rankings, the world’s fastest growing economies chart, most liveable city tables, the UN’s human development index, the global competitiveness report and the international corruption index.

The top ten IAREM outcomes for 2015 

(2014 scores in brackets)

  1. United Arab Emirates 33.73 (30.76)
  2. Singapore 31.15 (32.65)
  3. Norway 28.95 (25.07)
  4. Switzerland 27.72 (26.43)
  5. New Zealand 27.48 (21.42)
  6. Oman 27.46 (21.26)
  7. Luxembourg 27.3 (27.71)
  8. Taiwan 26.91 (25.91)
  9. Australia 26.73 (29.25)
  10. Iceland 25.00 (25.76)

The next ten

  1. Canada 23.54 (21.98)
  2. Bahrain 23.42 (21.93)
  3. Kuwait 23.34 (19.48)
  4. Sweden 23.2 (20.72)
  5. Panama 22.65 (22.76)
  6. Paraguay 22.21 (16.11)
  7. United States 21.94 (22.13)
  8. United Kingdom 21.87 (21.00)
  9. China 21.50 (20.83)
  10. Hong Kong 19.90 (18.37)

The third ten 

In order, are: Finland, Japan, Netherlands, Ireland, Saudi Arabia, Germany, Estonia, South Korea, Austria and Peru.

Completing the top forty

Vietnam, the Philippines, Thailand, Israel, Malaysia, Latvia, Denmark, Guatemala, Belgium and Bolivia.

Again missing from the top 40 are several large G20 economies which continue to struggle: France (46th), Mexico (48th), India (57th), Italy (59th), South Africa (60th), Brazil (62nd), Turkey (65th) and Russia (68th).

Countries of interest in 2015

Former Canadian Prime Minister Stephen Harper could consider himself a bit hard done by. His Conservative Party lost the October federal election after a campaign focussed largely on the economy. In fact, Canada’s score increased significantly over the year from 21.98 to 23.54, retaining a creditable 11th world ranking.

The USA’s economy continues to struggle as the nation enters an election year. Ranking fell from tenth to 17th, with lower GDP growth and median wealth. All other indicators were steady, resulting in the IAREM score declining only a fraction of a point. Like Australia – and Iceland, Panama and Luxembourg – the U.S. was just overtaken by other economies surfing the current benign waves just that much better.

We shall see if it’s still cranking in 2016 and who is able to get the best rides.


1. All major developed and emerging economies were evaluated, 75 in all. Excluded were poor developing countries, the tiny island states and kingdoms where valid comparisons are not feasible: Liechtenstein, Macao, Monaco, Vatican City and Qatar.

2. The only change to the methodology from that applied in 2007, 2013 and 2014 is that inflation data was drawn from tradingeconomics.com rather than the World Bank in order to use the most recent figures.

3. See also footnotes in the first article in this series regarding methodology.

4. The author welcomes interaction. Readers are invited to join the discussion below and at the IAREM facebook page. Further data will be readily supplied.

You can follow Alan Austin on Twitter @AlanTheAmazing.

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