New Zealand has moved up five spots in the recent World Competitiveness rankings in 18th place, overtaking Australia that has dropped out of the Top 20 list. Australia has ranked 21st among the world's most competitive economies.

New Zealand, claiming the eighteenth spot among the world's countries, reflected the nation's strong economic recovery and wise economic policies to spur growth.

Oliver Hatwich, New Zealand executive director who helped compile data for the world competitiveness survey, said New Zealand's performance was in contrast with Australia.

Australia is the second largest trading partner of New Zealand, but it ranked 21st in the survey due to its declining employment conditions and tight regulations. These affected Australia's competitiveness ranking against the rest of the world.

New Zealand's performance may be more startling, according to Mr Hartwich, because in 2008, New Zealanders were facing ballooning budget deficits as the nation was embroiled deep in recession. During that time, Australia had no debt and its economy was enjoying the benefits of the mining boom.

New Zealand was ranked among the top 10 countries in the world for the high quality of health, primary and higher education, institutions, employment market efficiency and goods. The country was also noted for its excellent financial markets development.

The honour of being the most competitive economy for five consecutive years went to Switzerland. Singapore came in second place, followed by Finland, Germany and the United States as the top 5 most competitive countries. Making it to the top 10 are Sweden, Hongkong, Netherlands, Japan and the UK.

Phil O'Reilly, chief executive of BusinessNZ, said 2013's competitiveness survey results had once again highlighted the integrity and strength of various institutions in New Zealand. He said the country will still need to improve in exports and bureaucracy, and promote infrastructure and innovation.

Mr O'Reilly said New Zealand will have to address the lack of a more educated or skilled workforce since this affects innovation. He said the country is currently in critical need of skilled workers to further improve the economy.

Meanwhile, Australia's drop to 21st place was blamed on the high cost of doing business in the country, according to the World Economic Forum research. Study editor Klaus Schwab said Australia has a rigid labour market which seemed to show little improvement.

The Australian business community has cited bureaucratic red tape and stiff labour regulations as major contributors to the difficulty of starting a business.

The World Economic Forum is a non-government organisation in Switzerland that has prepared an annual report of the world's most competitive economies since 2004.

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