- Australia needs to supplement its traditional economy fueled by goods and services and invest in the digital economy to help drive future growth.
- Government must play an active role in enabling the digital economy, but it will require better collaboration between federal and state governments, agencies and citizens.
- Investing in education that skills citizens for the jobs of the future and enabling easier trade globally are just two ways government can make Australia digitally ready.
Remember when Australia was ranked 10th in the final medal tally at the 2016 Olympic Games in Rio? There was national outcry and disappointment, not to mention prime news coverage.
That scenario was a difficult one for many Australians to digest, but on the economic front, things have been going that way with little attention. On current form, Australia’s place in the global economy is set to plummet from 19th to 28th in 2050. We’ve also fallen down the ladder on rankings of global resilience1 and the global innovation index.2 To achieve economic growth at a basic level – 2% annual GDP growth – our economy needs an extra $32 billion pumped into it every year.3
How do we begin bridging that gap? That’s what our investment in the digital economy needs to be all about.
Essentially, the digital economy is the digital transformation of the traditional economy. For Australia, it will mean relying less on traditional models of goods and services to fuel the economy, and investing in ‘digital’ to help fuel economic growth at a basic level.
and the digital economy
In recent history, Australia has indeed been the lucky country – its prosperity between 1991 and 2015 was one of the longest continuous economic expansions of any developed country. But it is now facing challenges. Growth is slowing, and over the last five years it has seen a decline in real wages, as well as falling productivity. Unemployment remains stagnant at 5.6% despite more than 1 million jobs being added to the economy in five years.4
However, the future is not all grim. Despite its significant economic challenges, Australia has, for the most part, prepared itself to embrace rapid technological advancement. But while we are well prepared as an economy, it is what we do with this competitive advantage that will define our economic prosperity and national competitiveness over the next decade.
We’re often touted as being early adopters when it comes to embracing technology, and as consumers, that’s true. But we are at risk of slipping behind the world in digital readiness, especially when it comes to business.
Australia is ranked 18th on the World Economic Forum’s Network Readiness Index, slipping two places from the previous year.5 The index measures the capacity of countries to leverage information and communications technology (ICT) to improve competitiveness and wellbeing, so to say it’s an important one for the future is an understatement.6
The nature of the digital economy means that Australian companies are increasingly competing in the same marketplace as international ones. Geographic barriers are broken down with digital. But despite the urgency, research has found that the rate of digitisation in Australian industries is uneven, and still a large distance away from its full potential.7
Looking ahead: Digital economy
and the 18-19 federal budget
This year’s Australian federal budget shows some promising signs of a digital future. Creation of a Customer Data Right, itself to bring forth Open Banking and encourage competition in the Australian business landscape is a step in the right direction, and shows that despite the pressure from business to remain closed, the door has been wedged open.
Similarly other actions are showing ambition to digital futures. Despite its rocky journey, eight million homes and businesses will have been connected to the National Broadband Network by 2020.8 The Federal Government is developing a national trusted digital identity framework, allowing citizens to prove their identity online.9 More government services are moving to self-service and online options.
It’s encouraging to see, but also a time for the setting of urgent priorities.
The role of government
Government must take the lead and play an active role in the coordination of the digital economy, but the way government agencies are currently constructed isn’t conducive to this. Federal government needs to better collaborate with state governments, and state governments need to better collaborate across themselves, across agencies, and with citizens and industry.
Introducing collaborative policy design is one immediate way to begin doing this. The digital economy will require governments to be agile in the very nature that they operate. This means being able to respond quickly to change, and rapidly adapt policy and procedures to truly reap the benefits presented by the digital economy. It is this collaborative role that will ensure Australia is truly embracing the digital economy.
Invest in jobs
of the future
While technological advancement and industry innovation has contributed to a reduction in labour demand and increased unemployment, it has also created automatic market adjustments that can compensate for the direct decrease in labour demand. Additional investment is needed by the government to grow these areas of demand, and create the right jobs with the right skilled workers to fill them.
Unfortunately, Australia is lagging on a number of key science, technology, engineering and mathematics (STEM) indicators. The number of Year 12 students studying STEM subjects is declining and businesses are struggling to find STEM employees. Modelling by PwC shows that if Australia were to develop a STEM workforce in line with other leading countries, it would generate, in present value terms, an additional A$57.4 billion in GDP over the next 20 years.
Having agile policy and the right skills is half of the equation to making the digital economy work. The other half is opening up global access to our people and markets by making it easier to trade with us. There is a glaring need for Australia to modernise its trade infrastructure. By embracing automation and new technologies, Australia can foster greater connectivity and trust across the supply chain.
These changes will enable a more efficient trade landscape and enhance Australia’s reputation as a great place to do business. When it comes to doing trade, embracing digital isn’t a ‘nice to have’, it will be a ‘must have’ – especially considering our national ranking in ease of business slipping from 34th to 95th in just 7 years.10 Every year without an action plan, is effectively the risk of dropping down 8 places.
Connecting the future,
byte by byte
The future cannot be predicted with certainty, but the shifts of the past ten years will continue as technological change accelerates. As a society we must be ready to respond to that change in order to understand and grab the opportunities that come our way.
Embracing the digital economy will lead to increased competitive positioning, acceleration of productivity and wealth to the entire population. This shift has the potential to create jobs and improve economic growth, but it will be a challenge that requires a digital economy strategy that is ambitious.
We must move beyond traditional approaches to economic growth and take bold steps forward, and in the short term supplement our traditionally strong industries with a competitive digital edge.