Australia dropped out of the top 20 for the first time, falling one spot to 21st.
Switzerland, Finland, Singapore, Germany and the US took the top five spots respectively.
The WEF said highly innovative countries with strong institutions continued to top international competitiveness rankings.
“Australia delivers a consistent – and essentially unchanged – performance across the board, the highlight of which is its seventh rank in the financial market development pillar, the only pillar where it features in the top 10,” WEF said.
The report also put Australia in 15th place for higher education and training and 25th for its macroeconomic situation due to low deficit, inflation and debt-to gross domestic product ratio.
“The main area of concern for Australia is the rigidity of its labour market (54th, down 12), where the situation has deteriorated further,” the report said.
“Australia ranks 137th for the rigidity of the hiring and firing practices and 135th for the rigidity of wage setting.
“The quality of Australia’s public institutions is excellent except when it comes to the burden of government regulation, where the country ranks a poor 128th.
“Indeed, the business community cites labour regulations and bureaucratic red tape as being, respectively, the first and second most problematic factor for doing business in their country.”
AMMA CEO Steve Knott said the results showed that whichever party won Saturday’s election would have to urgently provide better support for doing business in Australia.
"In 2007, Australia's resource industry was the first sector to raise serious concerns that Labor's plans to re-regulate the national workplace system would lead to excessive cost pressures, productivity stagnation and an erosion of our international competitiveness," he said.
"Today, the WEF Global Competitiveness Report 2013-2014 ranks Australia just 21st in the world, behind New Zealand at 18th, Canada (14th) and the United Kingdom (10th).
"Whenever the Kiwis or Brits belt Australia at rugby and cricket, our nation calls for heads to roll, yet our government is effectively ignoring that 20 countries are now better placed to do business than Australia."
Knott said it was unacceptable that Australia’s labour market efficiency had fallen 41 spots to 54th in just two years.
"This is extraordinarily poor and should ring real alarm bells for those overseeing our economy and labour market,” he said.
“It also destroys the claim that Australia's current workplace relations system has the balance 'about right'.”
Knott called for the next government to take up a range of legislative and non-legislative initiatives as outlined in AMMA’s productivity discussion paper.
"There has been a lot of talk about productivity in this election campaign with both parties claiming to have the answers," Knott said.
"Whoever is sitting in the chair on Monday has to do better and deliver concrete policies, especially labour market policies, that actually support investment, competitiveness and the ability to successfully do business in this country."
