Australia: Domestic Production: Software Development, Hardware Manufacturing, R&D

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Overview:

ICT investment and deployment in Australia is yielding productivity growth levels amongst the highest in the world. The ICT generated productivity gains from the US are well documented. Evidence from the rest of the world is less conclusive. Comparisons of impacts of ICT upon productivity growth are consistently undermined by inevitable and unavoidable differences in methodologies and assumptions made. Nevertheless, attempts have been made by several authors to compare the results from different countries. For example Gruen (2001) presents a comparison of results for the Australian market sector with Oliner and Sichel's results for the comparable United States non-farm business sector. This is shown in Figure 6.6. It reveals how ICT has been productively employed in the latter half of the 1990s in Australia, with 1.3% growth in labor productivity due to capital deepening effects of IT, relative to the US with 1% growth. The UK and France experienced only 0.3% growth. According to Gruen (2001), comparative results such as this should be treated with caution, as there are inevitable differences in methodology and assumptions made. He treats any result that IT has contributed more to labor productivity in Australia than in the U.S. with caution.

Research and Development:

During 2000–01, expenditure on R&D by the ICT industry was $1,439m, 30% of total business sector R&D expenditure ($4,825m). In current price terms, R&D expenditure by the ICT industry was 23% higher than the level recorded in 1999–2000. ICT industry R&D expenditure was predominantly directed towards ICT research fields (88% of total ICT industry R&D expenditure). Major ICT research fields where ICT industry R&D expenditure occurred were Computer software ($476m in 2000–01) and Communication technologies ($471m), each 33% of the total expenditure on R&D by the ICT industry. The Computer services industry was the highest R&D performer in the ICT industry, with $602m (42% of the total), followed by the ICT manufacturing industry ($320m or 22%). R&D expenditure in ICT research fields by businesses not in the ICT industry was significant, being $591m in 2000-01 [38].
 

R&D EXPENDITURE BY ICT INDUSTRY GROUPINGS AND RESEARCH FIELD  [38]
ICT manufacturing industry
ICT wholesale
trade industry
Telecommunication
services industry
Computer
services industry
Total ICT industry
Total all industries
Research fields
$m
$m
$m
$m
$m
$m
1999–2000
Information systems and technologies
9.0
np
np
93.1
136.4
316.2
Computer hardware
8.2
4.0
—
5.9
18.2
37.3
Computer software
87.5
29.1
3.6
298.7
418.9
566.8
Communication technologies
99.9
102.2
107.9
14.7
324.6
356.0
Other information, computer & communication technologies
8.2
np
np
10.0
75.2
130.3

 
Total ICT research fields
212.9
np
np
422.3
973.3
1,406.6
Other fields
58.6
np
np
119.8
193.3
2,678.2

 
Total all research fields
271.5
234.8
118.2
542.1
1166.5
4084.8
2000–01
Information systems and technologies
11.6
np
np
94.9
118.8
309.1
Computer hardware
7.3
np
np
6.9
18.5
47.3
Computer software
67.3
39.6
3.8
365.3
476.0
728.9
Communication technologies
168.0
np
np
26.6
470.8
548.3
Other information, computer & communication technologies
7.0
76.7
80.0
16.3
180.0
221.3

 
Total ICT research fields
261.2
np
np
510.0
1264.1
1,855.0
Other fields
58.5
np
np
91.6
174.9
2,970.4

 
Total all research fields
319.8
251.6
266.0
601.6
1439.0
4,825.3

 

Domestic Production:

Total income from the domestic production of ICT goods and services was $50,199m in 2000–01, an increase of 25% since 1998–99. Income rises occurred in Computer services (37%), Computer and communications hardware, equipment and cables etc. (31%), Packaged software and associated licensing (23%) and Telecommunication services (19%). Note however, that the operating profit in generating this increased domestic production significantly deteriorated during this period  [38].
 

DOMESTIC PRODUCTION OF ICT GOODS AND SERVICES  [38]
Income from domestic production
1998–99
2000–01
Commodity group
$m
$m
Computer and communications hardware, equipment & cables etc.
3,619.5
4,728.4
Packaged software and associated licensing
515.6
634.0
Computer services
10,857.9
14,926.2
Telecommunication services
25,175.0
29,910.0

 
Total
40,167.9
50,198.5

Due to the large scale and size of the global market for IT products and services, opportunities exist across the board for Australian high tech companies with leading edge applications. The industry is highly competitive and the industry slow down has impacted across all product categories but particularly Internet related or ‘dot.com’ activities. However, markets  that Australian businesses have identified and targeted include:

  1. ASP
  2. enterprise software applications
  3. nanotechnology
  4. photonics
  5. security
  6. services
  7. storage
  8. wireless

Figure 6.1: International comparison of ICT expenditure and production[21]

The ICT manufacturing sector in Australia is not large relative to the rest of the developed world. Despite being a relatively small ICT producer, Australia is very a high ICT user. Figure 6.1 shows that 8.1% of Australian GDP is expenditure on ICT over the period 1992-1999, comparable with the levels in Sweden, the United Kingdom, and the US, but well above most other countries in the OECD[21].

 

 

 

 

These various ICT inspired productivity gains from around the world lead to growth in economic output, as shown in Figure 6.8. According to Figure 6.8, Australia and the US lead in the level of output growth attributable to ICT[21].

Figure 6.8: Percentage point contribution of ICT investments to output growth - Business sector, national price index, 1980-2000 or latest available year[21].

Exports:

Exports (including re-exports) of ICT goods and services totaled $5,973m in 2000–01, a 34% increase since 1998-99. Imports of ICT goods and services were valued at $17,286m, a 28% increase since 1998–99. This represents a trade deficit in ICT goods and services for 2000–01 of $11,313m and compares with $9,061m for 1998–99. In 2000–01, the value of goods re-exports was $1,657m compared to $1,018m in 1998–99. Excluding re-exported goods from the ICT imports and exports details, the value of imports ($15,629m) was equivalent to 31% of the value of income from domestic production in 2000–01, while the value of exports ($4,316m) was equivalent to 9%. These proportions were comparable to those for 1998–99  [38].

ICT MANUFACTURING EXPORTS (SHARE) AND TRADE BALANCE  [38]
Share of ICT manufacturing exports(a) in total manufacturing exports
ICT manufacturing trade balance (b)
1990 or closest available
2001 or closest available
2001 or closest available
%
%
%
Australia
2.3
3.3
–8.7
Canada
5.9
6.0
–3.5
Denmark(c),(d)
6.5
9.0
–2.0
Finland
7.3
21.8
5.4
France
7.6
10.9
–0.9
Germany(c),(d)
7.7
10.8
–0.9
Greece(c),(d)
1.4
5.4
–5.8
Iceland
0.1
0.2
–4.9
Ireland
24.1
39.9
11
Italy
5.9
5.6
–2.0
Japan
26.0
24.6
6.1
Mexico(c),(d)
3.2
24.8
0.7
Netherlands(c)
9.4
22.9
–0.7
New Zealand(c),(d)
0.7
1.6
–7.1
Norway
2.7
3.0
–3.9
Portugal(c),(d)
5.1
8.6
–2.8
Slovak Republic(c)
na
na
–2.8
Spain(c)
4.3
6.0
–3.6
Sweden
9.5
13.3
0.6
Switzerland
6.2
6.3
–2.2
Turkey(c),(d)
2.8
5.3
-6.9
United Kingdom
12.4
20.0
–0.2
United States of America
15.4
21.4
–2.1