Australia Skills Shortage Focuses on Economic Policy Performance

For nearly two decades, Australia has struggled with a serious shortage of skills in economic policy, relying heavily on population growth rather than productivity gains to increase the size of its economy. According to International Monetary Fund data starting in 2007, Australia and Taiwan were both prosperous developed economies, but their trajectories have since diverged significantly.

While Australia's population grew by 32 per cent and its real GDP per capita rose 16 per cent, Taiwan took a different approach. Taiwan kept its population growth low at just 1.5 per cent while surging its real GDP per capita by 83 per cent. If Australia had followed Taiwan's trajectory, it would have had about 6.4 million fewer people in 2025 and a real GDP per capita that was nearly A$60,000 higher.

Australia's economic underperformance since 2007 cost nearly A$60,000 of economic output per person.

Both economies face an aging demographic landscape. Australia has curbed the rise of its old-age dependency ratio through relatively high net migration. In contrast, Taiwan kept its net migration rate close to zero or negative, resulting in a sharper increase in its old-age dependency ratio, yet it still achieved faster growth in living standards.

Taiwan achieved this by making its own workers much more productive instead of relying on high migration to juice headline GDP. Decades of heavy investment in research institutions, advanced manufacturing capabilities, and technological development have built a world-class semiconductor and electronics sector. Data from the latest quarter showed Taiwan's economy grew by more than 14 per cent year-on-year, largely driven by strong demand for AI technology.

Why it matters

The comparison between Australia and Taiwan highlights the long-term economic consequences of policy decisions surrounding productivity and population growth. For readers evaluating economic management, the data demonstrates that developed economies can substantially improve living standards and foster advanced technological sectors while managing aging populations without relying heavily on high migration levels.