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Monday, 4 June 2001
Page: 27162


Dr SOUTHCOTT (4:20 PM) —I move:

That this House:

(1) notes that amongst the OECD, Australia is ranked:

(a) 3rd in information and communications technology expenditure as a percentage of GDP;

(b) 3rd in secure servers for e-commerce

(c) 3rd in internet multimedia content

(d) 6th in personal computer ownership; and

(e) 8th in total online population;

(2) notes Canberra has more adults accessing the internet than Washington; Darwin and Perth have more than Atlanta; Sydney, Melbourne and Hobart more than Los Angeles; and Brisbane and Adelaide are equal with New York;

(3) notes our take up rates of cellular phones are amongst the highest in the world;

(4) notes Australia's growth and increase in productivity during the 1990s exceeded that of the US;

(5) notes the financial services sector is greater in size than the mining and agriculture sectors combined, as a percentage of GDP; and

(6) rejects the view Australia represents an old economy.


Ms Julie Bishop —I second the motion and reserve my right to speak later.


Dr SOUTHCOTT —This motion is an attempt to highlight where Australia already is in terms of technology and our adoption of it and also to look at where we are as we consider the government's innovation statement and the opposition's knowledge nation. It is also an apt time to have a realistic debate on issues relating to technology and the benefits it provides the Australian economy. Over the last couple of years the debate has been a bit unrealistic and the enthusiasm for tech stocks had all the elements of a classic bubble. The lesson of the dot.com hoax is that attention to return on equity, return of investment, is crucial. It does not sell newspapers, it sends editors to sleep, but now that the bubble has burst it is evident that there are a couple of things we can say about the benefits technology provides the economy.

Only a year ago there was much debate about whether Australia was a new or old economy and how the Australian dollar was being sold due to a perception that Australia was an old economy. It was always an artificial distinction. The Prime Minister's insistence that it was not the production of technology but the use of it has actually been proven right by the turn of events. One year on, the NASDAQ crash, widespread tech wrecks, downsizing at Cisco and even domestic events like the collapse of One.Tel all demonstrate that the rules of gravity apply to all firms and, (1) that the underlying business case must still be made for technology companies, (2) that it is not the production of IT but the adoption of it which is important as a driver in the economy, (3) that Australia performs very well on most international benchmarks of IT usage and, (4) that Australian economic performance in the 1990s has been strong by comparison around the world and by comparison with Australia historically.

Michael Porter of the Harvard Business School recently said:

We need to move away from the rhetoric about `Internet industries', `e-business strategies' and a `new economy' and see the Internet for what it is: an enabling technology—a powerful set of tools that can be used, wisely or unwisely, in almost any industry and as part of almost any strategy.

The Internet will be an important source of competitive advantage for firms who use it within their overall strategy. We do not recognise enough in Australia how well we measure up against other countries in a lot of key measures.

Thomas Friedman in his widely read book on globalisation, The Lexus and the Olive Tree, puts Australia together with the USA, Britain, Canada and parts of Israel, Italy, Singapore and India as countries in the premier league when measuring bandwidth or connectivity. A 1997 OECD survey showed that Australia was ranked third in terms of IT and communications expenditure as a percentage of GDP. Only New Zealand and Sweden were higher. This included expenditure on IT hardware, IT services and software and telecommunications. A 2000 OECD survey showed that Australia is third in secure web servers for electronic commerce per million inhabitants. Only Iceland and the United States were higher. In an estimate of business to business activity via the Internet, Australia is the largest outside the G7 in total dollars. The same OECD survey showed that Australia is third in the OECD in Internet multimedia content per million inhabitants—only the US and Sweden are higher. The latest OECD figures show that in 2000 49.9 per cent of Australian households owned a personal computer—only the Netherlands and Norway have registered higher rates.

The National Office of the Information Economy report in November 2000 showed that Australia is eighth in the OECD in total online population, with 41 per cent of the total population accessing the Internet. Looking at student Internet access at school, we are seventh in the OECD, with 60 per cent online at school. While those figures show that non-metropolitan Australians older than 55, Australians with low income or Australians who are unemployed have lower rates, those rates are still quite impressive for personal computer ownership and connectivity. Also by looking at Nielsen ratings—comparing them with ABS data—we see that many Australian cities have higher levels of connectivity compared with comparable cities in the United States. Digital mobile phone connections were expected to exceed 50 per cent of the population by the end of 2000. That shows that Australia by most benchmarks performs very well compared with other countries around the world. We are really in the front rank on most of these indications.

It is also well recognised by the OECD and by other economies that Australia in the 1990s has performed well in terms of labour productivity, total productivity and economic growth. In fact, Australian growth and productivity during the 1990s has exceeded that of the United States. David Gruen and Glenn Stevens of the RBA have published a paper on Australia's macroeconomic performance in the 1990s which shows that from 1991 to 2000 GDP in the United States increased by 35 per cent compared with 40.5 per cent in Australia. Labour productivity in Australia in the nineties has increased by 2.9 per cent compared with 1.4 per cent in the 1980s. This is due to the productivity sapping effect of the accord in the 1980s and economic reforms, especially labour market reform and adoption of new technology, in the nineties. In fact, when we look at the last 35 years, labour productivity in Australia has usually been higher than the United States. That is due in part to the fact that the United States is a technology leader, whereas Australia can grow faster due to catch-up growth.

Analysis of the increase in productivity shows that our increase in productivity in the 1990s has been during the entire expansion of the nineties and is more broadly based across all sectors of the Australian economy—this is compared with the United States, where it has largely been concentrated in the production of computers and has largely occurred in the late 1990s. So our performance is good compared with Australia's historical performance and it is also good in international comparisons.

Point (5) of this motion should be rephrased. The financial services sector has grown from $21 billion in 1991 to $36 billion in 1999. By comparison, mining growth is smaller—between $18 billion and $26 billion over the same period—and agriculture, forestry and fisheries have grown between $11 billion and $18 billion over the same period. So point (5) should actually say that financial services is separately bigger than mining and bigger than agriculture, forestry and fisheries. While it is certain that last year the financial markets were influenced by the false dichotomy of the old and new economy, only 3.9 per cent of the United States work force is employed in the ICT sector. The comparable figure for Australia is 2.6 per cent. So it does not make much sense to judge the US dollar on 3.9 per cent, just as it does not make sense to judge the Australian dollar on 2.6 per cent of the Australian economy.

The OECD report Science, Technology and Industry Outlook2000 maintains the importance of the knowledge based economy and notes that it continues to grow within the OECD. This year's innovation statement from the government is an important step in guiding investment in science, and the adoption of the recommendations of the 1999 Wills review will assist biotechnology in Australia. The recent changes allowing 175 per cent deductions for new R&D, as well as the capital gains tax changes and the encouragement of venture capital, are important elements of the framework for the knowledge based economy. The government's innovation statement contains all the elements that are needed to successfully foster these industries. Australian openness to new technologies has always been an important factor in our increasing productivity and our performance in economic growth.

In conclusion, new technologies will provide an important source of competitive advantage within a firm's overall strategy. Rather than turning the rules of commerce on their head, the Internet should be seen as a business enabler. Again to quote Michael Porter:

Internet technology provides better opportunities for companies to establish distinctive strategic positions than did previous generations of information technology. Gaining such a competition advantage does not require a radically new approach to business. It requires building on the proven principles of effective strategy. The Internet per se will rarely be a competitive advantage.

Australia performs extremely well in many international benchmarks on the use of ICT. The private sector have adopted this technology, taken it up and run with it. The performance of the Australian economy during the 1990s has been in the front rank of the OECD pack.