Ms JULIE BISHOP (4:40 PM) —I do appreciate the opportunity to support the motion moved by the member for Boothby for it enables us to consider this question of old economy versus new economy, which admittedly received more air time in previous years, particularly during the dot.com boom of 1999. Then, proponents of the so-called new economy were quick to criticise the Australian economy as being old compared with, say, the United States, which was undoubtedly considered the world's leading new economy in the past five or so years. They pointed to the exchange rate as evidence of our old economy status—or more particularly, the world equity market's view of Australia as an old economy—because, as the argument went, we did not have sufficient exposure to the new growth areas in the information and communications technology sector, we had a trade deficit in IT hardware and our proportion of IT stocks in our national share market capitalisation was low. It is about time we debunked some of these myths.

There was much gnashing of teeth that we did not have a new economy. We were waiting, much like the tramps in Waiting for Godot. As the Economist observedrecently, the two tramps Estrogon and Vladimir hang around waiting for a mysterious character who never turns up. We just swap Godot for the new economy and swap the tramps for a bunch of pseudo new economy cheerleaders, and we have everyone standing around waiting to see whether the new economy is going to turn up.

What exactly was meant by the new economy? It seems that there are a number of definitions. It certainly involved the acquisition, processing, transformation and distribution of information, bringing an acceleration of technical change. The new part is the synergy between computers, software and communications. But it is the measure of our use of information technology, drawing the correlation to increased productivity, that allows us to ascertain if an economy is new or old. The passage of time has certainly debunked some of the myths about the new economy—certainly the myth that Australia is an old economy has unravelled.

The OECD statistics as set out in the terms of this motion were said to be old statistics by the member for Lalor, but she has not done her homework. The OECD figures in a later report, The knowledge based economy: a set of facts and figures, OECD, Paris, 2000, reiterated these statistics: they are in fact current. They indicate the willingness in this country to adopt and use new technologies, and that has been the key to improving productivity. It is not just the direct impact of computers and the Internet on productivity that matters but, as we have seen in this country, it is also the ability of firms to organise their businesses more efficiently as a result.

As the Treasurer said in an address late last year to the Australian Business Economists' annual forecasting conference:

Given our open competitive economy, an environment fostered by this government's strong fiscal policies, one that has captured and used new technologies, new improvements, new capacities and new productivity developments, we are a new economy, no matter how it is defined.

In the USA, the underlying source of the American economic miracle in the 1990s—post 1995—was widely believed to be not only the use of IT but also the production of computers and semiconductors. That was certainly the hypothesis of the member for Lalor. But analysts have suggested that, while the use of technology across industry sectors had accelerated productivity growth, virtually all the progress had been concentrated in the durable manufacturing sector with very little spillover to the rest of the US economy. In other words, outside the manufacture of computers, there had been no increase in labour productivity growth after adjusting for the effects of the economic cycle. That is the difference with the Australian economy. Thus, while the impact of the acceleration of technological change contributed to the outstanding performance of the US economy in the late 1990s, there were other significant factors that came into play. The adjustments in the stock market in recent times have caused at least a portion of the American economic miracle to unravel. May 2001 figures show that productivity in the US declined in the first quarter of 2001 at an annual rate of 0.1 per cent compared with growth of more than five per cent during the year to June 2000.

With the forecast strengthening of the Australian economy, with growth at around 3.25 per cent, we have passed the enduring test of what constitutes a new economy—the way that IT is used to improve the efficiency of all parts of the economy, including the old economy sectors. As the Treasurer noted last year, historically the biggest economic gains from a new technology have come not from its invention and production but from its exploitation.