Why we need to invest in the Digital Economy

By CSIRO

29 January 2013

[youtube http://www.youtube.com/watch?v=7wHz76lb8E0&w=560&h=315]

Today we launched Australia’s largest publically-funded research initiative focused on the digital economy. The Digital Productivity and Services Flagship (DPAS), CSIRO’s tenth National Research Flagship, is a $40 million research initiative focusing on the services sector and optimising the full value of national broadband infrastructure.

We spoke with Ian Oppermann, Director of CSIRO’s Digital Productivity and Services Flagship ahead of the launch to find out why the research initiative was formed and what it was hoping to achieve.

Making the switch from a resource focused, to a digital services focused nation

Australia has received praise from many quarters for its strong and resilient economy.  In the face of a crushing and long lasting global financial crisis, this success is largely the result of the strength of Australian commodities markets, especially mining, coupled with steadily increasing demand from the emerging Chinese and Indian super-economies.

Paradoxically, productivity growth in Australia has fallen significantly over the last decade across most industry sectors. We have seen a dramatic decline in our multi-factor productivity in comparison to OECD countries.  For example, in just over a decade Australian labour productivity relative to the US has gone from almost 92% in 1998 to 84% in 2010. Our growth in the services sector has also slowed compared to developing nations such as India and China, where the range of services is expanding as their workforce becomes increasingly skilled and their populations educated and knowledgeable.

This leaves Australia in a vulnerable position for a post-mining boom economy.  According to the 2011 Grattan Institute Report, our economic prospects beyond the end of the current ‘resources boom’ will deteriorate significantly (as it did in the 1970s and 1980s) if the decline in our productivity growth performance is not reversed.

Australia’s challenge is to maintain a competitive edge in an increasingly complex and resource-limited world.  A successful digital economy is essential for driving Australia’s economic growth and maintaining our international standing.  Addressing efficiency opportunities opened up by broadband communications will be critical in an era of rising health costs and the budgetary challenges driven by an ageing population, pressures on the infrastructure and logistics sectors, and public expectations of governments. Innovation in the services sector built on a national broadband infrastructure and other technology will drive productivity improvement across the services economy.

Delivering services in a more innovative way

CSIRO will today officially launch the Digital Productivity and Services Flagship, our tenth national research Flagship, aimed at tackling these challenges head-on. Our goal is to “grow productivity in Australia through frontier services innovation and unlocking the value of broadband communications”. By 2025, we are aiming to create $4 billion per annum in added value for the Australian economy by developing and delivering more efficient and innovative services that improve citizen wellbeing and prosperity.

The Flagship also represents a new frontier for CSIRO, which has traditionally been more focused on sciences directed at domain specific parts of the economy such as mining and manufacturing. Our specific focus areas will be Government services, Commercial Services, Health Services and Smart Infrastructure. The creation of the Digital Productivity and Services Flagship in conjunction with the rollout of high-speed broadband provides opportunities for new and enhanced services with potential for significant impact in multiple domains. Realising such benefit will be enhanced by the development and uptake of services across the spectrum of research domains within CSIRO.

Delivering the planned outcomes from the Digital Productivity and Services Flagship will require an enterprise response. We are creating a national focus for services innovation by combining our research in ICT, mathematics, economics, social science and the knowledge of how to apply such research outcomes across key domains that are driving the Australian economy.

Australia will remain a ‘lucky country’

The issue of reversing Australia’s productivity decline requires long-term, sustained investment to deliver the transformational innovations required to address this issue. The role of ICT and digital services in transforming traditional industries offers an opportunity to build a competitive position for Australian SMEs in a market which has seen many major leaders change position in recent years.

The challenges faced in transforming Australia’s digital economy are many and complex. It is, however, the area of most potential gain and where the greatest opportunity exists. With almost 80% of Australia’s GDP based on services, innovation in this space is crucial for Australia’s long-term growth and prosperity.

I believe Australia remains a “lucky country” with an optimistic future. A focus on services innovation will help to drive our economy forward and show what is possible in a more prosperous and more personalised future.