Analysis

Australia: Analysis: National IT Strengths and Weaknesses

Australia's Comparative Advantages in the Information Economy

Australia is well placed to take advantage of the benefits of the information economy. It has the skilled workforce and R&D resources available but has failed in execute and has thus missed out on the technology boom in the 90's. A reoccurring scenario seems to be that of Australian institutions failing to capitalize/commercialize on the results of local R&D. Although seed capital is available to initially fund enterprises, funding to take these organizations to the next level of development has been lacking. Australia's private sector has been incapable of developing a top-tier ICT environment in the Commonwealth. If the government and the Aussies' themselves wish to participate in this modern day environment, they will have to look to government and organizations such as NOIE and local educational institutions to take aggressive initiatives as the private sector has failed. This said, it is yet to be seen that the Australian people want to participate since they themselves represent the private sector. The text below outlines some of Australia's advantages and disadvantages in the Information Economy. Australia has a great starting point to become a world ICT innovation leader, but the question is whether the people really want that or are happy with the status quo.

Advantages:

A range of Australia's comparative advantages in the information economy include :

Australia's well established legal and institutional structures make it a safe and supportive environment for commerce.
Australia has a world class telecommunications network and cable rollout, including a leading edge hybrid fiber optic/coaxial cable (HFC) network, providing a strong domestic market for online content and services.
Australia has a tradition of rapid technology uptake - including one of the highest personal computer penetration rates in the world - and our consumer markets are sophisticated and enthusiastic about new information products and services.
Australia is close to Asian markets, trade strongly in the region already, and have a body of business and trade knowledge that will be critical as the information economy expands in the Asia Pacific.
Because Australia lies in a different time zone to Europe and North America, an Australian base allows for global continuity of work flows and efficient handover of activities, for firms servicing markets in two hemispheres.
Australian businesses and households are among the most advanced and sophisticated users of information and communications technologies in the world.
As an English-speaking country, with great multilingual diversity, Australia has a natural advantage as a regional base for firms looking to build their business in the global information economy.
Australia offers a well-educated and highly skilled workforce for new information businesses.
Australia's climate, way of life and environment are attractive to international enterprises.
Australian life is characterized by creativity and openness [30].

Australia's competitive advantage in ICT lies in a worker population that is highly skilled, competent, and highly productive, according to Ian Dennis of the Whitehorse Strategic Group. The wage of an ICT worker in Australia also compares favorably to those in the US or Europe – at least from a company point of view, he added. There is also a developed infrastructure and stable business environment [31].

Disadvantages:

The 2003 ICT Trade Update revealed that Australia generated an ICT trade deficit of AU$14.4 billion for the 2002-03 financial year – similar to the deficit of 2001-02 – with ICT exports totaling AU$5.3 billion and ICT imports totaling AU$19.7 billion, each marginally down on the previous year Despite the nation's advantages, Australia's AU$14.4 billion trade deficit in ICT remains a sore point with both the ALP and the Australian Computer Society, although the federal government is unconcerned by the large figure. Australia has the ability to become a world leader in ICT, but fails to commercialize on technology developed in the country. This technology is consequently consistently lost to businesses overseas. "We have talent, we have IP [intellectual property], we don't know how to commercialize it and retain the companies in Australia," said Peter Kazacos, founder of outsourcing specialists Kaz [32].

David Barbagallo, chief technology officer of Mincom, is quoted as saying "we can't maintain the investment levels unless we retain the profits in Australia". He also warned Australia had a limited window of opportunity to capitalize on its advantages. "Our skill base and innovation advantage is a passing phase," said Barbagallo, and claimed there were 10 million Indians in IT and 300 million people in China under 18 learning English. "We have to be an export oriented nation [33]."

Australian small-to-medium enterprises have to partner with multinationals to break into foreign markets. The government also has to do more than just enact policies. Brand Hoff, managing director of Tower Software said only 25 percent of federal government IT purchasing was undertaken with local companies, compared to an average of 55 percent of all IT purchasing undertaken within Australia [34]. Barbagallo said there was no cultural consideration within the government to buy Australian IT. "There are deeply held biases – both subconsciously and consciously – that actually inhibit [purchasing IT from Australian SMEs]," he said [34].

Rob Drury, the executive director of the Australian Information Industry Association, said one of the main problems with commercializing technology in Australia was the nation's tax laws. Things such as capital gains tax discouraged personal investment in start-up companies, according to Drury. It was suggested that if the government gave similar tax concessions to investing in start-up companies as they do to investing in property there would be more research and development and more commercialization of that research in Australia [34].

"The deficit remained constant only because of the ICT industry downturn, which saw decreased demand for ICT products and services," said ACS President Richard Hogg. "As conditions gradually improve across the sector, we expect the deficit to resume its previously high growth levels unless steps are taken to reverse the trend [2]."

The biggest cause for concern, according to the reports author Professor John Houghton of the Centre for Strategic Economic Studies, is the AU$13.8 billion deficit in ICT equipment.

"Of the $2.8 billion in ICT equipment exported from Australia in 2002-03, only 44 per cent was produced locally, with re-exports amounting to $1.6 billion," said Houghton. Re-exports are items brought into Australia and re-exported with little or no value added. Over the last five years ICT equipment exports have declined by two percent annually, but within that figure re-exports have been growing at eight percent per year while locally produced exports fell by 9.5 percent annually [35].

"This is particularly disturbing since it suggests that Australian ICT equipment producers failed to participate in the boom of the late 1990s. For them to participate in the emerging recovery, something has to change," said Houghton [35].

"The rapid growth of offshore outsourcing globally has demonstrated just how portable services have become in the 21st century," said Hogg. "We cannot afford to concentrate on services to the exclusion of other potential growth sectors in light of predictions that a substantial proportion of our software and services sector will move offshore over the next few years [12]."