Westpac chairman Lindsay Maxsted says 2012 stands as the year in which Australia woke up to the fact that it was rapidly losing its cost competitiveness – and the mining industry is partly to blame.

“It’s being coming for a long time, but I think we really saw that in spades during the course of the year,” Mr Maxsted said during a panel discussion with other senior business leaders at an Australian Financial Review luncheon on Tuesday.

He said part of the reason for the loss of competitiveness could be attributed to labour inefficiencies, labour work practices, the cost of labour and the high Australian dollar.

Mr Maxsted, who is also a director of global miner BHP Billiton, said “the backlash of the mining boom” was also to blame.

“The mining boom in itself caused a lot of inefficiencies around the bulk of projects and operations where all of us involved in that industry just wanted to get the iron ore out of the ground or the coal out of the ground because pricing was so good and the margins were so good,” he said.

“I think we paid a price for that in terms of cost inefficiencies.”

ANZ chairman John Morschel said Australia seemed to be focusing on increasing taxes and putting more impediments in front of business, when the focus should be on restricting expenditure.

“Basically, we need to live within our means,” Mr Morschel said.

“It’s the same as any business. Why don’t the same rules apply to government?”

Mr Morschel said there should be greater focus on what the money was being spent on, whether it be subsidising industries, increasing social benefits or increasing the size of the public service.

Tighter control on spending was needed if Australia was to avoid following the path of debt-ridden Europe, which had been driven mainly by spending beyond its means.