Australia's Digital Economy

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 can not 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. These commitments reflect the recognition, made by the Australian Government, 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. This Australia's Digital Economy: Future Directions —Snapshot provides an overview of the key areas of focus. A more detailed discussion of Government and industry initiatives and a more in-depth look at the case studies is provided in Australia's Digital Economy: Future Directions —Final Report.

Australia and other world economies are currently facing a challenging global financial situation. However, a crisis can also be viewed as an opportunity; 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 result in more than 70 000 jobs being added to the Australian economy and add 1.5 per cent to the level of Australia's Gross Domestic Product within a few years.²

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The digital economy: defined

Key to realising Australia's potential benefit from the digital economy is to ensure 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 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 your doctor receiving your pathology results electronically.

For businesses, the digital economy can provide opportunities to more efficiently engage with suppliers and to both expand and better serve their customer base. On the Yorke Peninsula, within two years of adopting broadband, a 110–year old printing operation began specialising in 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.³ 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.⁴ 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.⁵

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What 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.

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.

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The need for strategic action

Existing data suggest 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 households rates of internet take–up and business adoption of e–commerce.

By 2008,⁶ close to 75 per cent of Australian household 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 (see 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 broadband⁷

Chart 1: Take-up of computers, internet and broadband - text version   

In 2007–08⁸, 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-commerce⁹

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.

In 2007,¹⁰ Australia's rate of household access to the internet was 64 per cent, behind with the United Kingdom (67 per cent), Canada (68 per cent based on 2006 data) and South Korea (94 per cent). Broadband take–up also trails. In 2007, the number of broadband subscriptions per 100 inhabitants in Australia was 23 per cent compared with 26 per cent in the United Kingdom, 27 per cent in Canada and 31 per cent in South Korea.¹¹

Australian business take–up of the internet and broadband is at par or only slightly lower than our international peers. In 2006, the rate of internet adoption in Australian business was 94 per cent, at a similar level to the United Kingdom (94 per cent based on 2007 data) and only just below the rate of internet adoption in Canada (95 per cent) and South Korea (97 per cent).¹² Australian businesses are also strong adopters of broadband relative to their overseas counterparts. In 2006, 90 per cent of Australian businesses had broadband, significantly ahead of businesses in the United Kingdom (78 per cent) and only slightly less than Canadian businesses (92 per cent) and trailing South Korean businesses (96 per cent).¹³

Despite the recognition of the internet as a key input, however, Australian businesses lagged key international peers on the effective use of the digital economy as a business output. Only 55 per cent of Australian businesses in 2006 had their own website compared with 75 per cent in the United Kingdom (2007 data), 68 per cent in Canada, 61 per cent in France and 58 per cent in South Korea.¹⁴ As a percentage of total enterprise turnover, the share of revenue derived from e–commerce was lower for Australian companies than their international counterparts. In 2005, only 10 per cent of turnover in Australian businesses came from e–commerce whereas in the United Kingdom and France e–commerce accounted for 17 per cent of turnover and in South Korea the figure was 22 per cent.¹⁵

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The role for Government

Developing Australia's digital economy requires action by government, industry and the community as a whole. The Government's role is to fill a gap left by the market, to address social inequity, to protect the community, to assist markets to work fairly and efficiently and to 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 provides. 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 potential of Australia's digital economy.

[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] System Knowledge Concepts, Creating new markets: broadband adoption and economic benefits on the Yorke Peninsula (June 2008) p 6.

[4] 'Automatic Response: Rio Tinto's Mine of the Future', mining-technology.com, 29 September 2008 (last accessed: 25 June 2009).

[5] 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).

[6] Based on Australian Bureau of Statistics data (see chart 1).

[7] 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.

[8] Based on Australian Bureau of Statistics data (see chart 2).

[9] 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.

[10] Based on Organisation for Economic Cooperation and Development data, see infra note 11.

[11] Organisation for Economic Cooperation and Development, The Future of the Internet Economy: A Statistical Profile, 17-18 June 2008, p. 8–25 (last accessed: 25 June 2009).

[12] Id.

[13] Id.

[14] Id.

[15] Id.

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