Australia’s economy is predicted to fall out of the world’s top 20 by 2050, according to new research by PwC.
PwC’s report, released today, was based on estimates of future purchasing power, growth in the working population, workforce education and growing prosperity among low-income countries.
But while economic experts say the report’s results aren’t surprising, local business advocates say the findings bolster the need for renewed investment.
Peter Strong, chief executive of the Council of Small Businesses of Australia, said what Australians should take from the report is the need to innovate in order to stay economically competitive on the world stage.
“It’s an indication of what could happen if we go down a certain pathway, which is problematic at the best of times,” Strong says.
“We do need to concentrate on the innovation and the people that do the innovation, the small business people.”
The report found countries with emerging economies such as Nigeria, India and Mexico will reap the benefits of a younger workforce and a faster-growing populating, pushing Australia further behind in the global ranks.
Out of the 24 countries in the study, emerging economies were predicted to grow at 4% per annum compared to 2% for developed economies between 2011 and 2050.
China was projected to overtake the US as the world’s largest economy by 2017 and in 2050 the world’s three “economic giants” will be China, the United States and India.
NAB chief economist Alan Oster told SmartCompany Australia’s predicted position is purely based on changing demographics and PwC’s results are “not a surprise”.
Peter Strong says the education sector needs to lead the way in encouraging more young Australians to become innovators.
“In the school system we produce people to work for other people, not to work for themselves.
“Education systems can either push people into the corporate world or they can help people innovate,” Strong says.
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Countries are increasingly using the world’s resources to build their own economies, as emerging markets offer lower production costs and gradually larger consumer markets, the report found.
Strong says more small businesses will begin looking to offshore production, but “there will always be a manufacturing sector in Australia… it will always start here”.
PwC economist Jeremy Thorpe told the The Australian Financial Review Australia has “punched above our weight” economically since the 20th century gold rush.
“We’ve been a small but advanced economy, and as other larger economies become more advanced they will have to gain more importance than they historically have had,” Thorpe said.
Despite the predicted dominance of the emerging markets in the next 37 years, average income per capita will remain far greater in advanced economies, with the current gap too big to bridge within this time frame.