According to The Heritage Foundation (Heritage), a US research institution, Australia now ranks as the third most-free economy in the world. In the Heritage’s 2021 Index of Economic Freedom^[1] the organisation reports that Australia ranked above Switzerland (4^th globally) and Ireland (5^th). Australia was also ranked well ahead of all major advanced economies, such as the UK (7^th), Canada (9^th), the United States (20^th), Japan (23^th), Germany (29^th), France (64^th) and Italy (68^th).

Australia joins top five for economic freedom

The survey produced a 2021 overall global economic freedom score of 61.6, the highest recorded in the 27-year history of the Index.

Of the 178 economies ranked in the Index, five are considered ‘free’, and an additional 92 are rated at least ‘moderately free’. However, 81 economies still received overall scores below 60 and are rated ‘mostly unfree’ or ‘repressed’.

New Zealand, Australia, Switzerland and Ireland join Singapore as the only economies considered ‘free’ with economic freedom scores above 80 on the 0–100 Index scale. Australia is ranked third among 40 countries in the Asia–Pacific region, and its overall score is above regional and world averages (see chart below).

The survey has rated Australia a leader in economic freedom since the inception of the Index in 1995. The country’s scores on judicial effectiveness, government integrity, business freedom, monetary freedom and financial freedom are among the highest in the world.

In 2021, the Heritage noted: “Australia has 15 preferential trade agreements in force. The trade-weighted overall tariff rate is 2.6 percent, and 332 nontariff measures are in effect.

“Government policies do not significantly interfere with foreign investment. The competitive financial sector is well developed, and all banks are privately owned. The exchange rate has been allowed to adjust flexibly to absorb economic shocks caused by the pandemic.”

Disparity in economic freedom in the Asia-Pacific region

The Asia–Pacific region is distinguished by an extraordinary disparity in levels of economic freedom. Four of the world’s 10 most-free economies are in this region —Singapore, New Zealand, Australia and Taiwan (6^th globally) — yet a large number of the other countries remain ‘mostly unfree’.

China’s economic freedom score is 58.4, making its economy the 107^th freest in the 2021 Index. Its overall score has declined by 1.1 points, mainly due to a decline in fiscal health. China is ranked 20^th among 40 countries in the Asia–Pacific region, and its overall score is below regional and world averages.

The Indian economy remains in the mid-range of the mostly unfree category. The country’s overall score is unchanged, with an improvement in business freedom offset by falls in judicial effectiveness and other scores. India is ranked 26^th among 40 countries in the Asia–Pacific region.