Australia and the Information and Computer Technology revolution

Well, is there a prize for Australia for doing ICT better, or to a larger extent? Yes, there are a number of prizes.

1. ICT is a tool to enable us to differentiate our low-technology and medium-technology products from those of our competitors.
2. ICT, if we did it better or did more of it, would enable us to export more high-tech products, both pure ICT ones, and those containing significant ICT; and remember, the high-tech end is where the growth lies for international trade.
3. If we were more ICT literate, not blind, to use Paul Anderson’s words, we would also be able to make much more intelligent purchases of ICT products from abroad.
4. If we were doing ICT better, and if we were doing more of it, we would certainly create jobs, many with high intellectual content and low adverse environmental impact, and the world might start to think of the Australian dollar or Australia Inc. as an attractive growth stock.

The prize is effectively an industrial one, an industrial one affecting all industries but especially high-tech ones, within which, as a very significant component, stands ICT production. Of the US economic output in the year 2000, about 8 per cent was due to ICT, but of the real growth between 1995 and 1999, one third came from ICT, much of it from ICT production and the rest from use.

Well if there is a prize to be gained, what blockers do we need to clear away in order to gain that prize, and how do we do that?

First, there is a set of blockers that have lowered Australia’s overall industrial research and development performance. We have had unfriendly taxation structures, aversion to risk-taking, shortage of venture capital, a UK-inherited culture sustaining a gulf between much of the R & D community and industry, a low level of technological literacy in Parliament and sometimes company managements, and certainly a lack of will, skills and incentives on the side of our public-sector institutions to commercialise.

Governments of both political persuasions started some years ago to address these problems, and the commitment by the coalition government in January of $2.9 billion to 'Backing Australia’s Ability' is quite properly focused on the goals of wealth generation or other improvements in our lives through innovation.

But in the ICT area, some particular aspects of the situation have to be flagged.

First, there is the industrial structure. With the exception of Telstra and perhaps News Ltd, we have no really large players in the ICT area that are Australian owned. The problem with the non-Australian owned multinationals operating in Australia is that, apart from a few conspicuous exceptions, they all too frequently see Australia as just a sales target. We have many indigenous small players, and very few medium ones of the size of, say, the smart card company ERG or Cochlear. What the small enterprises desperately need is help to go global or even to be born global.

On the public-sector side, the first issue is one of balance. About one third of research and development workers in industry are working on ICT. On the other side, the government is spending only 5.5 per cent of its R&D budget on ICT. It spends no more on ALL the CRCs per annum than it is spending in grants to firms in the textile, clothing and footwear areas, for new plants and buildings, R&D etc. Figures now a few years old showed CSIRO was spending more on textiles, clothing and footwear than ICT. Also, the Australian Research Council, according to their website, awarded only one post-doctoral fellowship in the ICT area last year, although classification problems may make this an underestimate.

Next, there is the issue of the quality and resourcing of universities, especially in the computer science area. The price for the universities’ principal product – a trained Australian student – is not theirs to set, instead it is set by the Commonwealth Department of Education, Training and Youth Affairs (DETYA). Economists call this a monopsony and they are about as keen on monopsonies as they are on monopolies. Not surprisingly, the monopsony power has led to a situation where staff members are leaving computer science departments in droves, especially the better ones, and the departments cannot replace them. The problem is accentuated by the quaint view of DETYA that it should be cheaper to teach computer science than electrical engineering, or chemistry. And so the official price paid per student is lower. Not surprisingly, universities are not keen on taking more Australian computer science students, despite everything you read in the newspapers about there being a shortage of trained individuals.

And this is the greatest problem of all in the public sector: its inability to supply the human capital that the private sector so desperately needs. Even worse, not only is there a quantity problem, reinforced by DETYA policies, but there is a quality problem among the trainers. This is why the decision by the Government in January to fund a world class ICT centre, outside the funding parameters of the Department of Education, Training and Youth Affairs, has been so welcome.

Aiming to do for ICT what the AIS did for sport, there is no single initiative that could be more important in the public sector than this. Such a centre will need to create much human capital, and in particular train many trainers, and it will have to be staffed to a significant degree by people imported to this country. It is simply not practical to imagine that one could assemble such a centre from existing talent in Australia and create a world-class enterprise in the process.

To sum up: Australia must find a new path to ensure the GDP statistics continue to look great; a path which ensures they will look good, too, when denominated in dollars, euros or yen. Intelligent use of ICT across our society will be critical, but at the moment the amount of ICT intelligence we have is too small. ICT production itself can play a major role in securing growth, but we need to focus on growing our own Australian-domiciled companies, rather than hoping for favourable boardroom decisions taken in Tokyo, Helsinki or Silicon Valley. Such domestic ICT production has the potential to underpin trade growth, as mineral prices and Australia’s terms of trade fall off the bottom of the graph.

As we move towards an election, I hope there can be bipartisan acknowledgment of the problem, and measures taken to address it. For many of the measures are ones for governments to take. With WTO-friendly industrial support, and with policy and financial repair of our over-stressed education system, acknowledging the priority status of ICT, all Australians can share in the winnings.