Australia's Digital Economy
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The importance of the digital economy
The digital economy is essential to Australia's productivity, global competitiveness and improved social wellbeing.
The digital economy is highly dynamic. It will ultimately encompass the entire economy and many, if not all, facets of our society. The digital economy presents Australia with a unique opportunity to shrink the distances that have historically dominated our domestic and international relationships, opening up new markets for engagement and growth. In addition, it will continue to change how we interact and socialise—people can now connect, collaborate and participate online in previously unanticipated ways that enrich their lives.1 The impact of the digital economy will also include new and emerging uses of technology, such as remote specialist diagnosis of patients, as well as uses that we cannot even begin to imagine.
The Australian Government is committed to maximising opportunities for all Australians to benefit from the digital economy. The Government has announced key initiatives to lay the foundations for a vibrant digital economy such as the National Broadband Network and the Digital Education Revolution, among others. These commitments reflect the Australian Government's recognition that a world-class digital infrastructure is a key input for our future—similar to electricity, gas and water.
However, to fully develop our digital economy, world-class digital infrastructure by itself is not sufficient. To ensure that Australia maintains its quality of life and international standing, the Australian Government, industry and the community must each take steps to achieve the maximum participation of Australian households and businesses in the digital economy.
Australia and other world economies are currently facing a challenging global financial situation. However, a crisis can also be viewed as an opportunity to promote long-term economic success by investing in critical infrastructure like the National Broadband Network and smart grids. One recent report estimates that the adoption of smart technology in energy, water, health and transport, and the roll-out of high-speed broadband could add more than 70 000 jobs to the Australian economy and 1.5 per cent to the level of Australia's Gross Domestic Product within a few years.2
Globally, economies around the world are steadily harnessing the benefits that digital technologies offer to replace and streamline traditional systems and processes, increase efficiencies and productivity and develop new markets and revenue streams. As the Organisation for Economic Co-operation and Development (OECD) recognises, the use of information communication technology (ICT) and e-business skills, as well as the organisational changes enabled by technology, play an increasingly pivotal role in achieving productivity gains.3 The digital economy presents opportunities to reduce business costs. Evidence indicates that the cost of completing a transaction online is lower than the cost of completing one offline.4
Case study: Google Maps—building a product for the world from Australia
Google Maps is an online mapping service. Its usability makes it easy for anyone to find where they are going and move the map around to see other nearby locations without needing to be a map expert. Its satellite and other imagery has sparked our curiosity. Mobile phones, particularly smart phones, have made it even more useful when you are on the road trying to find the best route. Millions of people around the world use Google Maps everyday and it is integrated into around 150 000 websites. The prototype for Google Maps was built in Sydney, Australia, before it was bought by Google in 2004. Shortly after the acquisition, the Google Maps team set up Google's Sydney office and continued to work on the product with a team in Silicon Valley, California. As one of the Google Maps co-founders, Lars Rasmussen, says: "The Web means that it doesn't matter where you are…you can live here in Australia and build products for the world thanks to the internet."
For more information about Google Maps, please see the complete case study on Google Maps.
The digital economy: defined
Key to realising Australia's potential benefit from the digital economy is ensuring that we have a common understanding of what we mean when we use the term 'digital economy'. The Australian Government defines the digital economy to be:
"The global network of economic and social activities that are enabled by information and communications technologies, such as the internet, mobile and sensor networks."
The digital economy comprises the computers, phones, game consoles and devices most of us use each day. It is the ability to start up a web browser and search for a local restaurant, to send a text message to your friend or to use a navigational device in your car. The digital economy includes paying for goods with your debit or credit card at the store, or when your doctor receives your pathology results electronically.
For businesses, the digital economy can provide opportunities to engage more efficiently with suppliers, and expand and better serve their customer base. On the Yorke Peninsula, South Australia, within two years of adopting broadband a 110–year old printing operation began specialising on higher value activities after outsourcing large scale print runs to a contractor in Perth. In addition, a local financial advisory and insurance broker began writing policies from around Australia, where previously its business was almost exclusively local.5 Increasingly, the digital economy refers to lecturers posting course outlines, study materials and even lecture videos online for their students. It includes the ability to collaborate and participate through online photo or video sharing sites, and the use of sensor networks to monitor water levels or traffic flows.
The use of networked, digital technology spreads across all industry sectors. In the mining industry, sensor technology and autonomous remotely operated mining processes are being trialled to improve efficiency and lower production costs.6 On our beaches, Surf Life Saving Australia recently received funding to implement a comprehensive information and communications technology (ICT)system to enhance communications and critical information sharing with emergency services.7
Back to topWhat does success look like?
It is almost impossible to describe an end point for the digital economy because technology is constantly evolving. Nevertheless, it is possible to identify some of the key elements that a successful digital economy in Australia will encompass, acknowledging that their ultimate form may vary over time.
| Who | What | How |
|---|---|---|
| Government | Digitally aware and enabling |
|
| Industry | Digitally confident, innovative and skilled |
|
| Community | Digitally literate and empowered |
|
The key elements to a successful digital economy are a Government that is digitally aware and enabling; industry that is digitally confident, innovative and skilled; and a community that is digitally empowered and literate.
Case study: Atlassian—built via the digital economy for the digital economy
Atlassian is not a household name in the same way a computer manufacturer may be, because it builds productivity tools for back end use. However, its customer base includes 30 of the world's top 50 corporations and companies such as Accenture, American Express, Deutsche Bank, HSBC, Sony Computer Entertainment, Pixar and PriceWaterhouseCoopers. Atlassian was founded in Sydney, Australia, and now employs over 200 people in its Sydney headquarters and offices in San Francisco and Amsterdam. Its flagship products are JIRA, an issue tracking software, and Confluence, an enterprise wiki. These tools allow project teams to work collaboratively and effectively, often distributed across time zones. For example, Sony Computer Entertainment uses JIRA and Confluence to create collaboration sites for teams to share game assets such as audio tracks, artwork and marketing materials.
Atlassian was, in a sense, born digital and global. The company's first product sales were made to customers in London, United Kingdom. All sales are completed online and its software downloaded from its website. For the fourth year in a row, Atlassian was named as one of the winners of the 2008 Deloitte Technology Fast 50, which ranks the fifty fastest growing technology public and private companies for Australia based on percentage revenue growth over the three years from 2006 to 2008.
For more information about Atlassian, please see the complete case study on Atlassian.
The need for strategic action
Existing data suggests that Australian households are increasingly participating in the digital economy and that internet and broadband take-up by Australian businesses is strong. However, Australia lags key international peers for household rates of internet take-up and business adoption of e-commerce.
By 20088, close to 75 per cent of Australian households had a computer and, of those, 90 per cent connected to the internet (i.e. 67 per cent of all households). Of the 67 per cent with internet (refer to chart 1), close to 78 per cent had broadband. This compares to 29 per cent with broadband in 2004–05, and illustrates the rapid take-up of broadband by Australians.
Chart 1: Take–up of computers, internet and broadband9
Chart 1: Take–up of computers, internet and broadband - text version
Australian businesses are using the internet and broadband at even higher rates than households (refer to chart 2). In 2007–0810, 87 per cent of businesses had internet access and 93.5 per cent of these (i.e. 81 per cent of all Australian businesses) had broadband. In 2003–04, only 42 per cent of firms with internet access had broadband. However, data also suggests there is significant potential for business to further engage in the digital economy, for example, in their level of contribution to (as opposed to their use of) the digital economy. Of the 87 per cent of businesses using the internet in 2007–08, only 42 per cent had a web presence, and only 27 per cent took orders online.
Chart 2: Business use of the internet,broadband and e-commerce11
Chart 2: Business use of the internet, broadband and e-commerce - text version
When compared with key international peers, data shows that Australia lags in several key digital economy indicators.
Table 1 lists comparative data for Australia, several other Organisation for Economic Co-operation and Development (OECD) economies, derived from the OECD's Statistical Profile on The Future of the Internet Economy, June 2008. The statistics indicate that the level of internet take-up and broadband penetration amongst Australian households lags relative to the United Kingdom, Canada and South Korea. Despite this, Australia ranks well in relation to the number of individuals who ordered goods or services online. This suggests that households who engage with the digital economy are using it to undertake transactions.
In relation to Australian businesses, comparative data indicates high rates of use of the internet and broadband as an input to the business, but low rates of contributing to the digital economy or using it as a business output. This suggests that Australian businesses are not harnessing the full efficiency and productivity benefits of the digital economy relative to their international counterparts, which may lead to a loss of global competitiveness.
TABLE 1: COMPARATIVE DATA BETWEEN AUSTRALIA AND OECD ECONOMIES
| Digital Engagement12 | Australia | United Kingdom | Canada | France | Korea |
|---|---|---|---|---|---|
| Households with home access to the internet (as a percentage of all households) | 64% (2007 data) | 67% (2007 data) | 68% (a) (2006 data) | 49% (2007 data) | 94% (2007 data) |
| Number of broadband subscriptions per 100 inhabitants in 2007 | 23% (b) (2007 data) | 26% (2007 data) | 27% (c) (2007 data) | 25% (2007 data) | 31% (2007 data) |
| Individuals who ordered or purchased goods or services on the internet in 2007 (as a percentage of adults) | 42% (2007 data) | 45% (2007 data) | 30% (2005 data) | 26% (2007 data) | 44% (2007 data) |
| Businesses using the internet (as a percentage of businesses with 10 or more employees ) | 94% (2006 data) | 94% (d) (2007 data) | 95% (2006 data) | 95% (2006 data) | 97% (2006 data) |
| Businesses with a broadband connection (as a percentage of businesses with 10 or more employees) | 90% (2006 data) | 78% (e) (2006 data) | 92% (2006 data) | 87% (2006 data) | 96% (2006 data) |
| Business with their own website (as a percentage of businesses with 10 or more employees) | 55% (f) (2006 data) | 75% (g) (2007 data) | 68% (2006 data) | 61% (2006 data) | 58% (2006 data) |
| Enterprises' total turnover from e-commerce, (as a percentage of total enterprise turnover) | 10% (2005 data) | 17% (2006 data) | figure not available | 17% (2006 data) | 22% (2006 data) |
The role for Government
Developing Australia's digital economy requires action by government, industry and the community as a whole. Government's role is to fill a gap left by the market, address social inequity, protect the community, assist markets to work fairly and efficiently, and address market failures.
The transformation of our economy into a digital economy is appropriately, however, a market-led phenomenon. Consequently, the Australian Government's primary role in developing the digital economy is that of an enabler—enabling individuals, households and businesses to take up the opportunities the digital economy offers. In its role as enabler, for example, the Australian Government is building or facilitating the development of our digital infrastructure, facilitating innovation and setting a conducive regulatory framework. With these commitments, it then turns to industry and the community to take the lead to realise the full the potential of Australia's digital economy.
Back to topDevelopment of this paper: three stage consultation
This Australia's Digital Economy: Future Directions—Final Report identifies the steps that the Australian Government, industry and the community will each need to take to achieve the maximum participation of Australian households and businesses in the digital economy.
It provides a detailed discussion of Government and industry initiatives and includes all of the case studies chosen to show how Australians are successfully contributing to the digital economy and benefiting from it. The Australia's Digital Economy: Future Directions—Snapshot provides an overview of the key areas of focus.
This paper has been developed collaboratively via a three-stage consultation process. Firstly, three workshops and a high-level digital economy forum were held in August and September 2008 in which participants were asked to identify aspirational goals for where Australia's digital economy should be in 2013 and the roles for industry and government to achieve these goals.13 Secondly, in December 2008, the Government hosted a digital economy blog14 as part of a broader Government blogging trial. The purpose of the blog was to collect feedback from the public on areas of importance for the development of the digital economy and on the themes identified through the initial consultations. Thirdly, submissions were invited on a consultation draft for the development of this paper. Over 115 submissions were received from a diverse range of stakeholders,15 which have further informed the key areas of focus.
[1] Mike Wesch, 'An Anthropological Introduction to YouTube', Presented at the Library of Congress 23 June 2008 (last accessed 25 June 2009).
[2] Access Economics, The economic benefits of intelligent technologies (May 2009), p. 37.
[3] Organisation for Economic Co-operation and Development, Broadband and the Economy, Ministerial Background Report DSTI/ICCP/IE(2007)3/FINAL, pp. 5–6
[4] The OECD's 2008 Information Technology Outlook (published in January 2009) p. 213
[5] System Knowledge Concepts, Creating new markets: broadband adoption and economic benefits on the Yorke Peninsula (June 2008) p. 6.
[6] 'Automatic Response: Rio Tinto's Mine of the Future', mining-technology.com, 29 September 2008 (last accessed: 25 June 2009).
[7] The Hon. Kate Ellis MP, '$4.4 Million Boost to Surf Life Saving Australia to Help Lives', Media Release, 12 May 2009 (last accessed: 25 June 2009).
[8] Based on Australian Bureau of Statistics data (see chart 1).
[9] Source: ABS Household Use of Information Technology (HUIT) 2007–08 (Cat. No 8146.0). Note: Broadband data are not collected in the HUIT survey prior to 2004–05.
[10] Based on Australian Bureau of Statistics data (see chart 2).
[11] Sources: ABS Summary of ICT and Innovation in Australian Business, 2005–06 released 19 November 2007, (Cat. No. 8166.0), ABS Summary of ICT and Innovation in Australian Business, 2007–08 released 25 June 2009 (Cat No. 8166.0) and Departmental estimates. Notes: (1) The columns refer to the percentage of all firms using internet or broadband technology, while the lines refer to the percentage of internet using firms that take orders online or have a web presence (2) The ABS advises that the data points for 2006–07 and 2007–08 are not strictly compatible with the previous years because of minimal differences in coverage associated with the revised ANZSIC.
[12] The Future of the Internet Economy—A Statistical Profile, OECD, June 2008, p. 8–25. Notes:
a) Statistics for 2001and every other year there after include the territories (Northwest Territories, Yukon Territory and Nunavut). For the even years, statistics include the ten provinces only.
b) Government estimates.
c) OECD estimates based on company reporting.
d) Includes all of NACE 55.
e) Includes all of NACE 55.
f) Website includes a presence on another entity's website.
g) Includes all of NACE 55.
[13] See www.minister.dbcde.gov.au/media/media_releases/2008/069
[14] See Future Directions Blog.
[15] See Digital Economy Consultation Submissions.
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