Australia’s competitive standing is slipping

By James Kelaher*

Australia often seems to rank near the top of many international benchmarks, and it seems to have been that way for a very long time. So when new comparisons arrive, it’s normal we start at the top, run our eyes down a few places until we see Australia… and then complacently shift our attention back to the sport, or Big Brother, or maybe some cooking show.

However there’s one important area where we are starting to slip and it goes right to the heart of many of our rankings; our global competitiveness.

Over the past few years our ranking by the World Economic Forum (WEF) has been dropping and we now sit in 20th place, behind South Korea, Qatar, Finland, Canada and Norway. We are just three places ahead of our friends across the ditch, New Zealand.

So why is this when our education system and our main research institutions are regarded as among the world’s best by the same WEF ranking system?

A key reason is Australia’s comparative lack of investment in research and development, especially by governments and small business. Our level of R&D spending hovers around 2.2 per cent of gross domestic product, less than the European Community and the United States. Our percentage would be even lower, if not for the efforts of a few of our largest companies – especially those in mining and financial services which, in recent years have been pushing business investment in R&D to new heights.

A tangible benefit of innovation is increased productivity which, not surprisingly, is another area where Australia is starting to draw flak. Innovation drives productivity, which in turn drives economic growth. It’s pretty simple really: our competitiveness and productivity are slipping because we are not putting enough effort into innovating.

That’s despite hard-nosed studies by accounting and advisory firms including KPMG, Deloitte and most recently Allen Consulting pointing to returns on innovation spending by governments of between 300 per cent and 600 per cent. Given the cost cuts occurring across governments and the wider economy, now would be an ideal time to be championing innovation: we can improve our economic performance and international competitiveness, as well as the benefits that we deliver to customers and constituents.

Information and communication technology is one of, if not the predominant drivers of global innovation and in investmentterms is regarded as a form of ‘super capital’ because of the high comparative returns achieved. What’s surprising is that ICT is often regarded as an area of investment underperformance in Australia and typically one of the first areas to be cut when things get tight.

The Australian government appears to be responding to these trends. Following a revamp of the R&D incentives available to business, it recently launched a new incentive program targeted at encouraging investment in innovation, especially by SMEs and has now tweaked the eligibility rules to include a wider range of ICT-related activities.

A major promotions and engagement program is now underway to make sure that the SME and ICT sectors get the message.

Of course there is still the government sector itself. Another underperforming area recently highlighted by the WEF was the inefficiency of Australia’s bureaucracies. It would be far better for government agencies to embark on a quest for innovation rather than just cost savings, as the latter are unlikely to lead to service improvement – more often the reverse.

Importantly, the digital economy is now emerging as a big factor in shaping nations’ capacity to innovate and to compete. Australia has a tremendous opportunity to capitalise on our comparatively strong rankings in this area, but we need to do much more and to do it quickly.

One of the areas that the bureaucracy can start to really focus on is how to provide much more value and far better service online. This includes cooperating with the private sector, including how we can more easily and more confidently avoid having to do things face to face or have to carry around and present paper documents.

A good example is the government Document Verification Service (DVS). It’s recently been announced the DVS will now be opened up for use beyond government, making it easier for people to assert (and protect) identity-related information – which is now copied and stored in all sorts of uncontrolled ways throughout the country.

Initiatives like this hold the prospect of streamlining services, such as a current initiative by the government and the telecommunications sector to enable phone SIM cards to be purchased more easily and activated online.

Australia Post and various other organisations are also looking at services that will enable us to securely keep electronic copies of important documents in a personal online vault, which we can access from anywhere – a lot better than the box in the cupboard approach that is presently so popular, and so dangerous.

We know that online services are less expensive to deliver, especially when take-up is strong. So we need to be thinking much harder about how to get Australians to embrace online services as their preference, as is already occurring overseas

For example the UK has its ‘Digital by Default’ program. In Australia, we already have very high levels of mobile phone adoption.

As smartphone penetration grows rapidly (an area where we are leading the world) we should be pushing much harder.

If we don’t find sympathetic ways of pushing the pace, we will find that our foot-dragging results in further slides in our global rankings and these are places that we will not easily recover from other competing nations.

Let’s start to develop a digital landscape that Australians can have more trust and confidence in and which they can use more effectively. The National Broadband Network is a good start, but there is much more that can and should be done. Otherwise we will slip further down the global rankings and miss opportunities, as well as carrying unnecessary and uncompetitive costs.

*James Kelaher is a director of Smartnet, which advises governments and corporate s on digita l adoption, develops online service delivery solutions and invests in innovat ive ICT start -ups. He has held senior roles in defence, nat ional security and human services. In 2005 he chaired the federal government’s smart services task force but resigned over a difference of opinion with the then Minister Joe Hockey and his then Secretary Patricia Scott, over their handling of the Access Card.

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