NEW ZEALAND OVERTAKES AUSTRALIA IN COMPETITIVENESS

New Zealand has climbed five places to be ranked 18th for global competitiveness and Australia has dropped out of the top 20 for the first time to be ranked 21st.

New Zealand's improvement reflects its steady economic recovery and "prudent pro-growth policies", says Oliver Hartwich, executive director of the New Zealand Initiative think-tank which helped compile the survey data.

"That contrasted with Australia, which is New Zealand's second biggest trading partner, where deteriorating labour market conditions and a heavy regulatory burden weighed on the country's competitive ranking," Dr Hartwich said.

"The performance is more startling when you consider that just five years ago New Zealanders were staring at ballooning deficits and a deep recession while the Australian government was debt free and riding the tailwind of a mining boom."

New Zealand was ranked among the top 10 in the world for the quality of its institutions, health and primary education, higher education, goods and labour market efficiency, and financial markets development.

Switzerland was ranked the most competitive economy for the fifth consecutive year. It was followed by Singapore, Finland, Germany, US, Sweden, Hong Kong, Netherlands, Japan and the UK.

BusinessNZ chief executive Phil O'Reilly says this year's survey results again highlight the strength and integrity of New Zealand's institutions while pointing to the need for improvement in innovation, infrastructure, exports and bureaucracy.

"With one of our most problematic factors being an inadequately educated workforce, the consequences for innovation are obvious," he said.

"Our economy has a critical need for more relevant skills. We urgently need to see more of the right applied skills coming out from our secondary and tertiary education institutions."