Western Australia would rank third in the world in economic freedom if it were its own country, but recent resources-driven success should not make governments complacent about reform, according to Canada’s Fraser Institute.
Chair of economic research at the institute, Fred McMahon, was in Perth last night at an event sponsored by the Mannkal Economic Education Foundation, to release the annual freedom index, which tracks economic freedom across 152 countries.
The list ranks nations on security of property rights, size of government, trade freedom, regulation and access to sound money.
He said that countries with high levels of economic freedom invariably had higher living standards, more political freedom, and were generally happier.
There had been over 500 papers analysing the correlation of the index with economic performance, with strong evidence of causation.
“Economic freedom is the reason Western Australia has created such a high standard of living while many resources based economies flounder,” Mr McMahon said.
He said despite the recent commodity boom, there was a trend over almost 200 years of falling commodity prices, and in the near term possible softening in China.
He warned that labour market barriers, deficit spending and a complicated tax system would hurt the state in the future, particularly in the event of a downturn.
Energy subsidies and the housing market might also cause potential problems, Mr McMahon said.
The top two nations on the 2014 index are Hong Kong and Singapore, while Australia overall ranked eighth.
When measured on a state by state basis, South Australia was sixth, Tasmania 15th, and Queensland 24th, placing last among Australian states.
