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Joint Standing Committee on Trade and Investment Growth
09/02/2018
Australia's trade system and the digital economy

ALEXANDER, Mr Peter, Chief Digital Officer, Digital Transformation Agency

CHAIR: I now call on the representative from the Digital Transformation Agency. Although we do not require you to give evidence under oath, this hearing is a formal proceeding of parliament. Giving false or misleading evidence is a serious matter and may be regarded as a contempt of parliament. I will now invite you to make an opening statement.

Mr Alexander : My opening statement will be brief. It is just about the role of the DTA and our mission in government, which is threefold: more digital services, better digital services and a better return on investment for government and the public on ICT and digital spend. What that fundamentally means is that we are looking at the way government delivers its services and the way that government operates and how we can transform and improve that through digitisation. Various governments have had attempts at this over many years. I guess we are taking a slightly different focus from past efforts, which have focused primarily on ICT. Our focus is on end users, whether it is businesses or individuals, and how we make their life better through whatever it might be—technology, process or people. That has been our focus.

CHAIR: Our focus, of course, is to report back to government on any shortfalls that you feel or that, from the witnesses, we conclude from our inquiries. The whole idea is to make the whole thing more streamlined and more efficient. Between us all, that is what we hope to achieve.

Mr Alexander : I would say that, in that context of trade and international competition, what is the thing for Australia that is a challenge from our perspective of delivery of government services but also interaction with the market? Government is a big procurer of services. Of course, in our service delivery we certainly procure a lot. The challenges we broadly have are around building capability. Australia has a great history of having well-educated, intelligent people who produce and are doing great work. We punch above our weight internationally in lots of forums. Technology and digital products have followed that stream. But we still have work to do. Emerging nations—emerging technologies are rapidly being developed in countries, so Australia has lots of challenges, I guess, in that space. We get rated in various e-government forums and technology forums and we always kind of do okay—in the top 20 or top 10—but we can always do better. I think we have challenges that we have to face in terms of education of the Australian population into technology and digital regimes. So we have, from early childhood and right through, a STEM focus we need to get—that is, a science, technology and engineering focus. We need to focus on that. We need to focus on universities and educating people in the right way for the right type of skills—technology and digital—in a business sense, not just getting programmers. We are never going to compete with some other countries in terms of programmers due to their sheer volume, but we can compete in terms of getting people who are smart and artistic and can take technology and blend it with business, art and service delivery. This is the broad challenge for Australia: competition and capability.

CHAIR: You have obviously found it pretty hard going with the underskilling up to date or to this point in time with Australian—

Mr Alexander : No, it is kind of—it has been okay. The skill levels are okay. I think it is the unmet potential and unmet demand that is going to come. As we move more and more into the digital world and more and more into technology, the challenge for us will be to meet demand. There are companies and agencies now who would not be getting the skills they require and not be getting enough people to do things they might want to do, so they will scale back or they will make do with what they have. I am sure if they had the opportunity they would hire more capable people. There is a small unmet demand now. I think the challenge for us is what is next. The future is the more scary part. We see these jobs growing. I will give you an example. A big area of growth is data. Data is exploding. Everyone kind of gets that volume. We all create more data and we see more data. Government creates more data in terms of how people will deal with us. Companies hold more data. There is a particular skill set: data scientists. It is not just the traditional data analysis type of work—it is someone who can take lots of datasets, do great analysis of it but make something meaningful and useful of it and deliver services better or whatever it might be. That particular area has unmet demand already. The growth in data management and data science is huge. People are quite confronted by the fact that it is a challenge. The government is doing good work in it. We have Data61, part of the CSIRO, full of data scientists. They have programs of work. But even they will tell you that the unmet demand over the coming 10 years is scary.

CHAIR: In our training institutions and universities et cetera, do you think they are on board and producing enough—

Mr Alexander : I would say they are on board. The challenge is getting their programs and curriculum to be more agile, more responsive and growing. So they are on board. They all know that they are getting—I think it is not only the institutions that are the challenge; it is getting kids much earlier in primary school and high school. We have had no end of legal graduates—nothing against lawyers—and so on. I studied accounting. We have accounting, economics and legal graduates coming through. I finished university in the early 1990s. We have this bulk of accountants and lawyers. We have kind of trended that way. We are not getting kids into science and technology. We are particularly not getting women into science and technology. We have to do more of that to get them early. By university it is too late. If they have not studied it at school and if they have not gone through, it is a real challenge to get kids into science and technology past school.

Mr RICK WILSON: Just on that, if I may: most universities now would have dedicated IT courses. I guess that is where the programmers are coming from. That is categorised as science. I think it is kind of related reasonably closely to physics.

Mr Alexander : Yes.

Mr RICK WILSON: That was by way of clarification. I am sorry to interrupt.

Mr Alexander : As an example, I am an honorary associate professor of the University of Canberra. I have had a lot of interaction with them and helping them with some coursework. For a long time their ICT courses were in their business function, which is an interesting place. They do not have a science function; it has been in their business function. At ANU it would be more closely tied with their engineering and economics. So different universities have it in different places. But, historically, it has been much closer to science.

Mr RICK WILSON: Enrolments in IT courses are—

Mr Alexander : A couple of years ago there was a fairly significant dip in that—and I am going back a couple of years; this is about 2014—the third-year course had more people in it than the first and second years at ANU, which was a concern. It just meant that the pipeline was drying up.

CHAIR: How can we promote that more?

Mr Alexander : There has been a lot of work around STEM and women in IT and getting that through primary school and high school and promoting technology and science. It is much bigger than just technology—it is engineering and a whole bunch of technical streams—and shifting them from being about straight-up programming. I think a lot of people think that IT is programming. IT is so much more. I think one thing that has helped with technology has been the prevalence of video games. You have kids coming through and all they do is play video games, and they go, 'Well, I want to get into video games'. It is kind of a triviality, but Minecraft has been quite amazing for the technology industry. Lots of kids play, but there is an ability to code in it and do development. So lots of kids have got into that and run their own servers and lots of things. So they come through school with an ability now that we would have thought you would have to do a course to learn. I think there is promise, but we are still losing a lot of kids who come through to other professions. Their parents would say to them, 'With technology, it is hard to compete with India. They have millions of people coming out of universities every year with great programming skills and the cost of their programming is so much cheaper than ours—why would anyone program in Australia?' But we have seen a bunch of really interesting start-ups in Australia. Of course, we have some amazing examples, like Atlassian, where we have had Australian companies, with technology built and designed in Australia, that have gone gangbusters and been amazing. So there is great opportunity. They are a great hope for Australia—that there are companies like that that, on an international market, will be the next—not Google, but they will do very well in markets internationally.

Mr HART: Can I just make an observation with respect to the most recent evidence that you have given. I think you have highlighted a particular issue with respect to attracting people into, for example, programming. There has been a commoditisation of particular jobs because you can get things done in India by an army of software engineers. That really leads me to where I think the future of Australia is, which is in the architecture of what we talk about in digital space. This comes to my point, which is that the OECD's Going Digital project suggested that government policy and regulatory framework needs to be reimagined and completely rebuilt from the perspective of a digital environment. I am a great believer in not having your standard set of processes where we tack on digital along the side but that we actually contemplate the economy as being digital. We contemplate all trade being digital. We contemplate communications being digital. We contemplate big data as being not just a potential but the essence of what we are dealing with. In other words, I see the potential for us is in the big-picture imagining of a digital future and the potential for a digital future. Obviously, your agency is tasked with the transformation of government and processes within government. How well are government agencies and departments engaging with that future and that vision—that is, looking at their processes and reimagining, from an engineering perspective, what happens?

I will just give you an anecdote from manufacturing. BMW make premium cars. One of the differences between mass-produced cars and premium cars is panel fit. In the early 2000s BMW was developing the engineering for what became the BMW X5. When you look at a BMW X5 from that era, there was one significant difference between the X5 and previous motor vehicles in the sense that the doors and the bonnet do not have adjustments on them. They have bolt holes and the doors fit. That required re-engineering of the production line so that you manufacture the chassis to sufficient tolerances that the doors fit. By reimagining the process engineering for the construction and manufacture of that car, they took out so many steps and they also increased the potential quality of the output. I see the potential for Australia as looking at reimagining everything that we do in the delivery of government services with that sort of mindset—in other words, not going off what we have done in the past but looking towards, as you said in your evidence, the end users and customer satisfaction and what is the objective of what we are trying to achieve.

Mr Alexander : It is a good anecdote because I think it is really fundamentally a physical version of what we are about. What we have done in Australia quite well for a long time is that we have had a focus on efficiency. We have done these things, and government is a really good example because we have said, 'We do it like this—let's just get better at that'. I think the fundamental shift in digital, as I said at the start, is not just about the technology you use—it is about what you do and how you do it. The first thing we have been doing—and agencies are getting better and better at it. The maturity and their approach is getting better and better. You will talk to Home Affairs. Immigration and Customs are doing some really interesting work around trade modernisation and single window for trade. They are doing exactly this, which is to say, 'What are we doing? What is the problem we are solving?' How do we go back to first principles and say, 'What is the problem we are solving?' If we were greenfields, how would we do it? Then we have the challenge, which is that we have to overlay that with the complications of legislation and all of the various things we have and say, 'Well, in a pragmatic and practical world bound by some of these things, which are really hard to change, what would we do?' We have this perfect world, we have this compromise pragmatism and we are seeing agencies get some pretty good outcomes and improvements in terms of customer experience and customer journey. I guess one of the really promising bits of work we have been doing—and it has international ramifications—is that we have been doing work on our digital identity. It is kind of a foundation piece to say, in the delivery of digital services, how do we know that the person or business we are dealing with is the right person and appropriate and vice versa? How do they have confidence that government or the business they are dealing with will serve them? So we are doing a bunch of work. A lot of agencies are doing that. We have reimagined that back to first principles to say, 'What is the thing you need to do?' We have done a lot of work with it. We are talking to international governments, which are all doing similar things. Lots of countries have digital identity and are asking how you would harmonise something like that and how you could have some brokerage between them. How could we have confidence that—at an easy level, for somewhere like New Zealand—we can trust their digital identities? At a more complex level, other countries that we do not have strong relationships with, how can we trust their digital identities? How can we broker international engagement of individuals, businesses and government to share data digitally, whether it is big datasets or just a particular transaction? How do we make that work? You are talking to Standards Australia, which is doing some really interesting work around things like blockchain—looking at standardisation of blockchain and how we can build standards there. It has great potential, but until it is standardised—to answer your question, is government doing good work in this space: yes. Is it as rapid and are they looking holistically at everything they do: probably not as much as we would like. But they are starting. I think what we are seeing is the maturity of government agencies, on a one to five scale, starting to move up into being much more purely digital from a base which was just not that—

Mr HART: Can I give another example. Human Services is tracking telephone inquiries, for example, through their call routing system in order to modify how they deliver things and dealing with particular issues. So they are flagging particular issues within their processing. In the digital space you have Facebook and social media dynamically changing somebody's social media based upon what attention and what reactions you are doing to particular topics. There is potential there for government services to deliver a unique experience on a webpage or through myGov based on the level of interaction between the user and the—

Mr Alexander : Absolutely. We are working with DHS, Tax and agencies to build that future and that kind of digital experience—going away from a straight customer experience to that digital experience and taking the lessons of Google, Facebook, Amazon and others and saying, 'How do you deliver an experience that meets users' needs?' One of the experiences historically has been that people have been a bit concerned—this is maybe 10-year-old work. People say, 'I am worried that government knows that about me. I am happy for Facebook, but if government knows and starts presenting things based on my government browsing history it is a bit creepy'. So people kind of shied away from that. But more and more our user research—we do a lot of user research and engagement with users at quantitative and qualitative levels, and they are expecting that from us. So we are doing work. There is a really good example with DHS at the moment. With myGov they were getting about a million calls a year just about student entitlement, updating data and how they update it and so on. They have moved that and they are moving that to much more digital. Students put in their income each week into an app—job done. It just solves so many issues for them. Just little trivial things like that save a million phone calls a year. First, it saves the students a bunch of pain and, secondly, it is an efficiency for them because there are a million fewer phone calls that they are dealing with out of around 25 million they deal with a year. It is a good thing. Are we doing work to take that digitisation lesson from big companies: absolutely.

CHAIR: Do you see the need for more public private enterprise combinations?

Mr Alexander : Yes, absolutely. I think the great potential is for us—again, we are seeing more and more of it in agencies. Government agencies are—rather than trying to build and run everything and compete with—some services that are a commodity that the market do really well, they are moving away from that and having industry do that. But it is not just at the commodity level. I think we are seeing some really useful work with partnership between government, start-ups and small companies to bring in creativity and ideas into big government machines, processes and services and saying, 'How could we do this differently?' For example, we have a product called the Digital Marketplace. It was fundamentally built to give digital start-ups an opportunity to procure and deal with government. We have seen more and more big agencies and more and more service delivery functions going out to that and sourcing digital expertise—for people to come in and advise and support them and go through processes. It has done about $63 million worth of business since it started just over a year ago. It is growing, and agencies are using it more and more. So we are seeing this great engagement based not just with the big international vendors—it is with Australian SMES that are smart and bringing in digital transformation rather than just commodity. Both are important.

Mr HART: So is there potential for—in the manufacturing space there was a significant transformation many years ago with Just-in-time. Again, you have manufacturers using their supply chains in order to maximise control and their efficiency. In the digital field, I am very interested in the potential for the use of peer-to-peer, blockchain and the like to send a job out to multiple small businesses in order to achieve the same result.

Mr Alexander : Absolutely. There are some really interesting examples. There is an Australian start-up that has done a bit of work lately. They are on our marketplace. Effectively, their model is exactly that in a digital sense. They are doing testing and software development. Their basic model is that they say, 'Here's the requirement. Put it out to a marketplace'. They have established peers nationally and internationally. So they had some code developed in Europe that came back to Australia. It went onto a government site, so there was a security check and a quality check that it went through. But it was great work and the cost was substantially less than it would have been had an agency hired a contractor to come in and do that work. That is happening today at a micro level. But the opportunity in that broader sense and in a macro way is substantial.

Mr HART: How do we move from opportunity through to realisation?

Mr Alexander : In the digital space, for government, I think our Digital Marketplace is about that. It is about saying that an agency wants a particular service. At the moment, it is more related to labour hire and particular small contracts, but there is an opportunity in that to say, 'Here's a piece of code we need developed. Here's a function we need fixed up. Here's some piece of work'. I think the marketplace for government services is building into that. I would suspect that—and we have had some engagement with the banks. Others are doing similar work at the moment and micro-tendering for small pieces of work. So that is what is termed the gig economy. It is growing in the digital space.

Mr HART: The downside, though, of a gig economy is the fact that, again, it is the risk we identified earlier with respect to commoditisation. You are putting downward pressure on—

Mr Alexander : Absolutely.

Mr HART: And we want to actually encourage people to invest time in getting skills and being paid well.

Mr Alexander : Absolutely. I actually spoke to the committee on taxation. We talked about digitisation and we talked about this. One of the things was: how do you deal with superannuation in a gig economy world. There are other things that are going to have potential long-term ramifications for the Australian economy as well if people are getting micro-payments and micro-work. But you are exactly right. Our mission is about the value-add, not the commodity, and getting Australia into a space like that where someone can redesign a system and rethink a whole system—

Mr HART: High value.

Mr Alexander : rather than devaluing. The reality with coding, in my opinion, is that we either buy that or machines will do it for us anyway. You drag and drop things today and you can code.

Mr HART: We had a presentation from Google, which said that, with both software and high-power CPUs, it is not efficient but it will produce a workable set of code and it will improve it over time. So the future for physical coding is limited.

Mr Alexander : The great opportunities that are out there for business and countries are well known. Artificial intelligence, machine learning, big data—everyone knows them and it is about how you deliver good solutions in that space that deal with cybersecurity, which is a challenge for us and for everyone. How do you tackle the problems and at the same time deliver great solutions? There are ample opportunities. To give you confidence, government agencies are looking at those and trying to understand where the opportunities in terms of government are and where the opportunities for Australia are and building that out.

CHAIR: Thank you, Mr Alexander. We certainly have some challenges ahead of us. I thank you for your attendance at today's hearing. You will be sent a copy of the transcript.

Mr Alexander : Thank you.