ew Olympic athletes would begrudge a silver medal, even though winning the gold was the point of the competition. If a recent report outlining relative international business costs is the sports arena, then Canada gets the gold – but only by a nose. According to consulting firm KPMG's "Competitive Alternatives: The CEO's Guide to International Business Costs," Australia has the second most cost-competitive business climate of the G-7 countries, Australia, Luxembourg, Iceland and the Netherlands.

Free Trade Pact Nears Completion Free trade between Australia and the United States came one step closer to becoming reality in February 2004 when the text of the Australia-United States Free Trade Agreement was finalized by those countries' trade officials. The governments of both parties must still legislate and enact the agreement, but having the text finalized makes that possible.         "This deal will further integrate the Australian economy with the largest and most dynamic economy in the world, delivering lasting benefits to generations of Australians," noted Australian Trade Minister Mark Vaile at the conclusion of the agreement negotiations.         Among the provisions included in the pact are free and open access for Australian exporters of almost all manufactured goods, access for Australian goods and services to the US$270 billion market for federal government procurement in the U.S. and legal protections that guarantee non-discriminatory treatment for Austra-lian service providers in the U.S.         For more on the FTA, see the Q&A in World Reports, May 2004, page 260.

        Released in February, the analysis compares several location-sensitive cost components (labor, facility, transportation, utility and financing costs) across four industry sectors (manufacturing, R&D, software and corporate services) in 121 cities. The U.S. is used as the baseline throughout the analysis, with the other markets included either more cost-competitive or less so. Overall, Australia is shown to have an 8.5-percent cost advantage over the U.S.; Canada's advantage is 9 percent. The United Kingdom takes the bronze at 2.4 percent. At the other end of the scale are Japan with a 23.8-percent cost disadvantage and Germany with a 13.9-percent disadvantage.
        By one measure – call it a qualifying heat to extend the Olympics analogy – Australia even beats Canada. "Australia has the lowest business costs for seven of the 12 business operations considered in the overall results," notes the report. "For the remaining five operations, Canada has a larger advantage over Australia, which brings Canada into first place overall." The sectors in which Australia ranks first in overall cost competitiveness are food processing, automotive parts manufacturing, metal machining, plastic product manufacturing, precision manufacturing, electronic systems development and testing, software design and Web content development.

Another way to apply the KPMG research is to analyze the business costs of cities relative to the U.S. average. Here, too, Australian metros are quite competitive. Of the 30 metros with a population of 2 million or more, Melbourne ranks second most cost-competitive with a cost index of 92.1, and Sydney ranks fourth (93.8). Of cities with a population of at least 1.5 million, Brisbane beats even these, with an index of 91.5. Smaller Australian cities do better yet. Canberra weighs in at 91.5, but South Australia's capital takes the cake. "Adelaide (90.4) has a very competitive cost structure, with business costs more than nine points below the U.S. average and more than 30 points below the comparably sized Japanese cities," according to the research.
        Breakdowns of industry cost competitiveness by metro area in most sectors show Canadian cities ranking high in virtually all categories (see the charts beginning on page 4 in the Canadian Section). But these same charts show another cluster of cities ranking high on the top 10 lists, and those cities are Australian. For more analysis of Australian and other business costs, refer to the KPMG report online at www.competitivealternatives.com.