Is Australia really the world’s third most free economy?

US think tank The Heritage Foundation, working with the Wall Street Journal, has placed Australia third on its annual “Index of Economic Freedom”. That puts us behind Hong Kong and Singapore, but above tenth-ranked America.

The index ranks nations by assessing ten factors:

• Business freedom
• Trade freedom
• Fiscal freedom
• Government spending
• Monetary freedom
• Investment freedom
• Financial freedom
• Property rights
• Freedom from corruption
• Labour freedom

We think this ranking needs to be taken with a decent quantity of salt, as The Heritage Foundation’s emphasis on freedom reflects its unashamedly conservative position. To understand where it is coming from, consider that the Foundation says its mission is “… to formulate and promote conservative public policies based on the principles of free enterprise, limited government, individual freedom, traditional American values, and a strong national defense.”

We also wonder if the Foundation has heard of the Carbon Tax or the Mining Tax – issues that we’ve been told are cruelling the economy. Nor does the Index take into account issues like the administration burden on SMEs, a topic championed by COSBOA and others.

Still, as you can see in the graph below, it’s an interesting exercise. And if nothing else, we beat New Zealand.*

* Rugby World Cup? What Rugby World Cup?