We’re in the foothills, Swiss are in the economic Alps

All Blacks captain Kieran Read receives the Bledisloe Cup from New Zealand's Prime Minister Jacinda Ardern after their victory in the second rugby Test in August.

Every few decades The Economist magazine, or “newspaper” as it prefers, singles out Australia for special praise. Last week, the prestige weekly splashed with a kangaroo and the heading “Aussie Rules — What Australia Can Teach the World”. “Perhaps the most successful rich economy,” the subtitle enthused.

Australians, who make up a successful multicultural country, probably could teach the world to be less racist or more relaxed. A holiday practically anywhere makes that obvious. But as far as our government policies go, other countries probably have more to teach. Our ­private and public wealth increasingly comes despite, not because of, public policy, which is increasingly petty and marked by kneejerk spending and regulation as the answer to every perceived problem.

“Rising incomes, low public debt, an affordable welfare state, popular support for mass immigration and a broad consensus on the policies underpinning these things — that is a distant dream in most rich countries,” The Economist cooed.

When awarding a gong, New Zealand, Israel or Switzerland surely deserves it more. For a start, none starts with anything like our resource riches. Indeed, Israel, having been surrounded by nations bent on destroying it, has achieved stellar growth despite having to devote more than 5 per cent of its GDP to military spending, almost triple what we spend.

The Economist dwells on what for Australians is becoming an annoying cliche: so-called “27 years of uninterrupted growth”. Please, if the US let half of Mexico move to Texas, it too would have strong GDP growth. Australia has high GDP growth because it has high population growth. Growth per person is what matters, and on that score Australia has done worse than New Zealand. Far from 27 years of unbroken economic growth, on that measure we’ve had recessions in 2000, 2006 and late 2008. New Zealand and Israel have achieved higher per capita GDP growth in six of the past eight years.

The Azrieli Towers in Tel Aviv.

Israel has more PhD-trained engineers per capita than any other country, and can boast 100 companies listed on the Nasdaq.

Peruse Australian “rich lists” and you’ll find mainly “financial ser­vices” and property fortunes — sectors rent-seeking with heavy government involvement.

Australia is so nice a place to live its governments can tax heavily, and poorly, without fear of emigration. Others can’t be so confident. New Zealand’s GST is better than ours, having few carve-outs and thereby enabling lower income tax rates. Switzerland dominates in the tax and fiscal policy stakes, though.

Here, the federal government increasingly collects most of the tax and doles it out to mendicant states, creating what economists call a “vertical fiscal imbalance” from hell. In Switzerland, the federal government collects only one-sixth of income tax; cantons and towns levy the rest, ensuring far greater accountability and transparency.

“There is significant variation in the level and progressivity of local income taxes both across cantons but also within cantons as each municipality sets its own tax level as a per cent of the cantonal tax,” economist Emmanuel Saez noted earlier this year.

Swiss governments don’t treat their citizens like idiots as most governments do, compelling employers to withhold income tax from their workers before they even get to see it. Workers send a cheque to Bern every quarter, a reminder of the cost of government. “The fact Switzerland does not have a withholding on earnings makes income taxes quite ­salient as individuals pay instalments directly to the government,” Saez added.

The maximum personal income tax rate in Switzerland doesn’t exceed 40 per cent, and most pay marginal rates in the low 30s. This is affordable in part ­because Switzerland uses wealth taxes more, arguably fairer than income taxes. Its 26 cantons in 2014, for instance, levied taxes on net wealth with rates varying from 0.13 per cent in the lighter-taxing German-speaking parts to 1 per cent in French-speaking ­Geneva. Long home to some of the world’s richest people, Switzerland has taxed wealth since the late 18th century.

The Bernina Express near Ospizio Bernina, Switzerland.

Switzerland and New Zealand have run superior fiscal policies, too. In eight of the past 10 years Switzerland has run budget surpluses; Australia hasn’t managed one. New Zealand returned to surplus in 2015 despite the after-effects of the Christchurch earthquake. Switzerland has even introduced a constitutional balanced-budget rule, forcing its govern­ment to balance its books across a three-year period. Swiss government expenditures have been a consistent 33.2 per cent of GDP, compared with about 37 per cent in Australia and 33 per cent in New Zealand.

The Economist says our public pension costs are half those of the OECD average — but at what cost? Compulsory super has led to the systematic fleecing of millions, as a flurry of recent reports attest. Australia’s super system looks like what you’d get if you asked consultants to design a system that maximised gouging of low-income taxpayers and administrative waste, without reducing Age Pension outlays in the future.

Foreigners thought so highly of the Swiss economy that from 2011 to early 2015 the Swiss National Bank had to cap the value of the Swiss franc at 1.2 to the euro, promising to create a potentially unlimited number of francs in exchange for foreign currency.

At the end of last year, little Switzerland, with a third Australia’s population, had foreign currency reserves of 833 billion Swiss francs. That is $1174bn. We had about $70bn.

A former senior editor at The Economist, Johnny Grimond, in an earlier survey of Australia, concluded we were “one of the best managers of adversity the world has seen — and the worst manager of prosperity”. We’ve had prosperity for some time now; we don’t deserve top spot in the policy stakes.