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  • Featured, Intellectual Property, Internet, News - Written by on Monday, October 8, 2012 15:41 - 22 Comments

    IT more valuable than mining, says Gillard

    news Prime Minister Julia Gillard has hailed knowledge and the technologies used to create and share it as being the key factor determining Australia’s future economic success — even beyond the resources sector — as she met with key figures from Australia’s technology sector and set in place key ‘Digital Economy’ strategies for the nation’s future.

    Over the past several decades, as the global technology sector has gained maturity, most of Australia’s politicians have ignored the sphere, preferring instead to focus on developing industries such as the resources and tourism sectors, which have been more valuable historically. However, over the past several years, the Labor Federal Government has increasingly talked up the worth of the technology sector, especially associated with the development of its National Broadband Network project. Over the weekend, Gillard added to weight to that trend.

    “The commodity most precious in the 21st century, more valuable even than iron ore, is knowledge,” Gillard told attendees at a forum at the University of New South Wales held to connect the Prime Minister with the technology sector. “The way we create and share knowledge will be a key determinant of our success in the Asian Century.”

    “It seemed not so long ago that thinkers like Barry Jones were counselling us to be ready for the digital future. That future is here. It is well and truly here. In a range of visible and invisible ways, it’s already integrated into all of our lives, and into our nation’s economy. Economic activity directly related to the internet contributed $50 billion to the Australian economy in 2010, but the indirect effects are just as important. These effects aren’t captured in GDP figures but they’re worth an extra $80 billion a year.”

    The Barry Jones referred to by Gillard is a Labor politician and broadcaster who was the nation’s Science Minister from 1983 to 1990 — a role in which he presided over the creation of the Questacon National Science and Technology Centre in Canberra, as well as the growth of the Commonwealth Scientific and Research Organisation and other similar initiatives.

    The Digital Economy Forum was attended by major Internet companies such as Google (whose local MD Nick Leeder penned a column on it this morning in the Financial Review newspaper), Facebook, and PayPal, as well as software giants such as Microsoft, and other local businesses active in the technology sector such as the Commonwealth Bank of Australia, Australia Post and Virgin Australia. A number of technology-related startups such as Shoes of Prey, Nicko’s Kitchen and Birdsnest also attended.

    In her opening remarks to the conference, Gillard said nothing was more important to the success of Australia’s digital economy than building the NBN. “The NBN is what the economists call a ‘public good’,” the Prime Minister said. “One of those projects like the Transcontinental Railway, the Sydney Harbour Bridge and the Snowy Scheme that creates a wealth of indirect benefits beyond those that can be calculated on a spreadsheet.”

    Gillard said the construction of the NBN would help increase Australia’s productivity as well as opening up new markets and industries. “Because if we can’t compete on quantity with developing nations that can provide ten times the number of workers for the same price, we will compete on quality,” Gillard said. “With quality skills, and quality infrastructure, we’ll be better able to take advantage of the opportunities that come our way.”

    In her closing remarks to the forum, Gillard made a number of commitments stemming from suggestions made during the proceedings.

    Firstly, the Prime Minister acknowledged there was “a short-term issue” around the availability of technology skills in Australia. “It’s been raised around the room, it’s not something that we can let drift, because when people point to enrolment patterns now in our universities there is a real reason to be concerned, that in the relatively short term we will not have available to us the skills sets we need, the software engineers for example,” Gillard said.

    To address this, Gillard said she would ask Minister for Skills and Tertiary Education Chris Evans to meet with some members of the group to further investigate the issue.

    Secondly, Gillard noted opinions from industry that the Federal Government, as a major employer, had a responsibility to model behaviour in the area of teleworking. With this in mind, some members of the industry group would be asked to meet with the secretaries of Federal Government departments and with the Public Service Commissioner to discuss government leadership in the area.

    Thirdly, Gillard noted that there had been a great deal of discussion in the room regarding the onset of the new generation of cloud computing technologies. “A lot of the contributions really have been about the power of cloud computing. But also the need to spread understanding about what this mean, particularly for small and medium-sized enterprises,” Gillard said.

    “So I will ask [Communications] Minister Conroy to bring people together in a discussion about that. I think it needs to be a genuine government-industry partnership, and for us to embark on a cloud computing strategy so that we can capture in terms that are going to make sense to people, what is very powerful about this and do it in a synthesised way. So if Minister Conroy could do that I’d be very grateful.”

    Lastly, Gillard said it was her opinion that the Federal Government should broaden its Cyber White Paper process, which is currently examining cybersecurity challenges for the public sector, to examine the ‘Digital’ space as well.

    “There was the discussion about skills and ecosystems and how we leverage all of this to sustain the development of the digital economy and the transformation of our economy generally. The sort of skill settings that requires, the innovation settings that that requires,” Gillard said. “I think we should try and bring that to the table for a broadened look through this White Paper and we’d not only take what’s happened in the conversation here today into that process, but we’d be calling on individuals around the room to be making some direct contributions to that process too.”

    The news comes as a number of major companies have recently kicked off substantial datacentre investments in Australia, with a number of them citing the development of the NBN as a stimulant for investment in the space. In June, for example, global cloud computing player and retailer Amazon confirmed that it had added an ‘edge’ location in Sydney to speed up the delivery of content to Australians, confirming a deployment model which was the subject of speculation some 12 months ago. In addition, other companies such as HP, NEXTDC and Metronode have recently launched major new datacentre facilities locally, as has US giant Rackspace.

    In addition, Australia’s technology startup scene has recently seen a flurry of activity, with tens of millions of dollars being invested in total in local startups over the past six months and a strong technology incubator scene flourishing in cities such as Sydney and Melbourne and rapidly developing in cities such as Brisbane, Perth and Adelaide.

    opinion/analysis
    I view Gillard’s meeting with a number of Australian technology sector leaders as being reminiscent of the meeting which US President Barack Obama held with executives such as then-Apple chief executive Steve Jobs, Facebook founder Mark Zuckerberg, then-Google CEO Eric Schmidt, Oracle CEO Larry Ellison and others in early 2011. It appears as if similar issues were discussed, with Jobs, for example, pushing Obama to stimulate technology skills in the economy.

    However, there’s one difference between the two meetings.

    Unlike the Obama administration, which, although it is aware of the technology sector, has been quite hands-off with it, the Gillard administration and the Rudd camp before it, has a very strong strategy of providing for Australia’s future in this area, courtesy of the National Broadband Network.

    Sure, the NBN isn’t a panacea for the technology sector; there are many other things which could be done by the Federal Government to boost the technology industry in Australia, such as tax incentives for technology startups and venture capitalists, infrastructure incentives for major datacentre operators and skills investment for everyone. Hell, the Federal Government should even be talking to Chinese vendor Huawei to attract it to list in Australia and host more of its operations here, although of course the Government doesn’t seem to be very good at talking to Huawei, in general.

    However, if there is one thing which governments should always be focused on doing, it’s on providing underlying infrastructure so that the private sector can build on top of that infrastructure. And that’s exactly what will happen with the NBN.

    Right now, infrastructure is a significant constraint on Australia’s technology and knowledge sectors. Information workers, after all, deal with information, and when uploading and downloading that information from each other is such a slow process, things are going to be inhibited. The better telecommunications infrastructure Australia has, the more companies will build on that — technology startups, datacentre builders, higher-order software as a service players and content companies such as film and video game studios.

    I’ve been following Australia’s technology scene for the better part of a decade (and I have read much of the backstory before that), and there’s never been an administration which understands the tech sector and invests in it to the same degree as the current Gillard Government, which is based on the work which Communications Minister Stephen Conroy did with then-Prime Minister Kevin Rudd in the two-ish years from 2007 through 2009.

    The fact that the Prime Minister is pushing this kind of Digital Economy development to such a strong extent is exactly what the technology sector needs right now — and I can only view it as a wonderful downpour of political attention after the drought years from 1980 through 2007. Let’s hope it lasts long indeed and that the Coalition finds a similar focus if it wins Government next year.

    Note: Microsoft co-founder Bill Gates was not at the Digital Economy Forum. It appears that Gillard met with Gates recently in the US in his philanthropic capacity relating to his work to end polio. However, we couldn’t resist headlining this article with this picture of Gates and Gillard. It also brings to mind a somewhat controversial comment made by Tony Abbott during the 2010 Federal Election campaign. Image credit: Office of the Prime Minister.

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    22 Comments

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    1. Posted 08/10/2012 at 5:28 pm | Permalink |

      IT more valuable than mining…

      So if they are re-elected we should expect an IT tax then….

      • Graham
        Posted 08/10/2012 at 5:33 pm | Permalink |

        Did IT suddenly become a non-renewanle resource? If not, no.

      • Zok
        Posted 08/10/2012 at 5:42 pm | Permalink |

        “Valuable” is not the same as “profitable”.

        If IT ever becomes more profitable than mining, an IT-super-profits tax wouldn’t be a bad idea.

    2. IT Governance
      Posted 08/10/2012 at 5:40 pm | Permalink |

      think we are getting carried away here. IT=knowledge??? lets not get too confused..

    3. Richard Ure
      Posted 08/10/2012 at 5:44 pm | Permalink |

      “there’s never been an administration which understands the tech sector and invests in it to the same degree as the current Gillard Government”

      This sad news is illustrated by the lack of any mention of the NBN as a factor in helping to reduce (Sydney’s) peak transport challenges in recent reports from Infrastructure NSW and Transport NSW. And not just for occasional teleworking.

      As Renai’s piece says: “Information workers, after all, deal with information, and when uploading and downloading that information from each other is such a slow process, things are going to be inhibited”. Traditionally such workers have clustered together to exchange information, but in the near future workplaces can be decentralised to transport nodes in the suburbs reducing the need for expensive and quickly filled roads.

      • Posted 08/10/2012 at 5:52 pm | Permalink |

        hey Richard,

        I’m sorry, I don’t really see the link between transport and the NBN in your comment — nor does it seem to have much to do with the current discussion.

        Renai

        • Posted 08/10/2012 at 8:05 pm | Permalink |

          Disagree.

          There was a BTRE report somewhere – (I’ll try dig it up) – that estimated the loss of $20b of GDP annually in Australia by 2020 due to road congestion.

          If having decent bandwidth – (up and down) – to allow for decent teleworking – (and that’s not “working from home”) – allows for a 10% reduction in the congestion problem, it’s not unreasonable to expect a $2b improvement in GDP.

          Then there’s a flow on effect.

          10% less cars on the road equal 10% reduction in vehicular emissions.
          10% less cars on the road means the 90% that are left are held up less, further increasing GDP.
          10% less cars on the road means 10% less wear and tear on the roads, reducing maintenance costs.
          10% less cars on the road means 10% less accidents, and less pressure on insurance premiums.
          10% less accidents means less pressure on ambulance and hospital services.
          If you’re one of the 10% teleworking, you’re spending less on fuel, less on city parking, and less wear and tear on your car, and not having to service it as often, so there’s more money in your pocket.

          Not to mention less stress in your life not having to deal with traffic jams every day.

          And you could extrapolate that in all sorts of other directions too.

          This is what they mean when they say the NBN is economically transformative.

          • Posted 08/10/2012 at 8:09 pm | Permalink |

            Found it:

            http://optics.michaelwyres.com/documents/btre_congestion.pdf

            “BTRE base case projections have these social costs of congestion rising strongly, to an estimated $20.4 billion by 2020. The city specific levels rise from $3.5 billion (2005) to $7.8 billion (2020) for Sydney, $3.0 billion to $6.1 billion for Melbourne, $1.2 billion to $3.0 billion for Brisbane, $0.9 billion to $2.1 billion for Perth, $0.6 billion to $1.1 billion for Adelaide, $0.11 billion to $0.2 billion for Canberra, about $50 million to $70 million for Hobart, and $18 million to $35 million for Darwin.”

            • Posted 08/10/2012 at 10:53 pm | Permalink |

              Michael,

              I’m sorry, but it’s unreasonable for the NSW Govt to build teleworking projections of the kind you and Richard are suggesting into their current transport plan. That’s a side issue for them, and this is a side issue for discussion on Delimiter. This line of debate is off-topic — please do not continue it.

              Cheers,

              Renai

              • Posted 09/10/2012 at 12:02 am | Permalink |

                I’m not saying they should project them. These are the side-effects.

    4. Northern Blue
      Posted 08/10/2012 at 5:48 pm | Permalink |

      Mining is almost exclusively an export industry. Mining is also clearly definable in what jobs we can gleen from it (there is plenty of historical evidence to work from). Finally we now have a $2Billion balance of trade deficit – so anyone exporting is a double bonus.

      The $50 billion contribution of the internet to the economy would most likely be internal churn through ISP services or domestic service/sales. So to be more valuable than the mining industry you’d think you’d be looking at new activities with potential to generate income from exports. Sizable export dollars at that.

      It’d be interesting to identify where they hope the industry is to develop – if only to allow students to get an idea of where they should focus their studies to best improve future ICT job prospects.

      • Drew
        Posted 08/10/2012 at 7:36 pm | Permalink |

        We should turn our “tyranny of distance” into a marketable point of differentiation, which we can sell to other nations (in this way our IT infrastructure will support an export industry). Australia is stable, politically and economically, which can be an important point for data security.

        The new data centres being created should include a focus on being promoted as a secure data storage for the information of the planet. Ping times might be longer, but you’ll know the data will be there when you need it. The government could support this with policy on managing customers’ data when any single data centre goes bankrupt.

      • Bruce
        Posted 08/10/2012 at 7:45 pm | Permalink |

        >$50 billion contribution of the internet to the economy would most likely be internal churn through ISP services or domestic service/sales. Yup, GDP – politicians love that figure as it leads on to tax revenue. Export activities? Not until we have taxed it. Export revenue will also be dependent on being prepared to fight the worlds patent lawyers. Australian SMB’s have a global reputation for being undercapitalised – something to do with our tax structures – so they know we wont last long in a fight.

        The development path for the industry is quite clear – get together with a bunch of your mates and try to build the next angry birds or attempt to gain 2 years experience in a commercial setting using all of the latest technologies before entering the industry.

        Back to the article: “nothing was more important to the success of Australia’s digital economy than building the NBN”. No, nothing is more important to a vibrant and creative economy than a vigorous and open ideas market in which people are free to to bring their thoughts to the table without risk of censorship and without having to second guess future laws bound in KGB like webs of data retention.

        Sorry Renai, I disagree with your optimism. IT can be done anywhere. While the NBN may enable some individuals to bid for international work, the tax, cost and now censorship structures in this country prohibit its development as an IT mecca. Malaysia has had its IT SuperCorridor for a while now – while they have some very capable people the public sector settings are not conducive to a wild risk taking IT environment and neither are ours. Our PM may utter all the buzzwords she likes but it does not change the fact that India and China (once it gets its legal system sorted out) will be where IT is done. We will be consumers, patting ourselves on the back for being early adopters of other peoples technology just like we are for TVs, computers, smart phones, flat pack furniture, etc.

        • Tinman_au
          Posted 09/10/2012 at 12:14 pm | Permalink |

          http://en.wikipedia.org/wiki/List_of_countries_by_tax_rates

          Our Corporate Tax rates are lower than the US and Japan, are you suggesting no one does “IT” in either of those places due to their higher taxation?

          We actually have lower taxes here than a most of the RotW, and we could have even lower still if we didn’t fork so much of it over to rent seekers like the miners…

          • GongGav
            Posted 09/10/2012 at 1:15 pm | Permalink |

            But that cant be right, we have GST, and income tax and… and… and… That cant be right!!! I refuse to believe it!…

            It’s amazing how many times I tell friends we’re one of the lowest taxed countries in the world, and end up pointing them to that wiki entry. It used to be that we had the most taxes, and thats what confuses people, but since GST there really arent all that many, and for most of them they are either largely one off hits (stamp duty), or so small and rare you never hear of them or they simply arent enforced.

            Even income tax, until you’re earning something like twice the average salary, there arent many countries that tax less than here. And of those, one pays zero income tax no matter what you earn.

            There is a simple test called the Big Mac test. Because McDonalds largely work off the same margins around the world, you can get a pretty solid idea of the disposable income in each country based around what it costs to buy a Big Mac meal. We’re pretty favorable.

            End of the story, we have one of the highest proportions of disposable income in the western world. Need to use that as a reference more than average income, it gives a better picture.

    5. MarkD
      Posted 08/10/2012 at 8:29 pm | Permalink |

      Speaking of Barry Jones. Love his quote on Wikipedia that everyone laughed at: “In the future there would be more computers than cars in Tasmania”.

      Unlike Barry, most people have long under-estimated the inevitable pervasiveness of first computers, then IT and now the Internet. We need to recognise that IT is *the* future and the only question is whether the mining boom will be our “Dutch Disease” or a stepping stone to the future.

    6. Posted 08/10/2012 at 8:35 pm | Permalink |

      One of the first things they’ll have to sort out is regulations preventing foreign (particularly American ones) from simply exploiting Australia’s talent as a cheap labor pool, with no regard for workplace rights.

      I worked at a medium to large Australian IT company, specifically in the video games industry, and me and around 150 other individuals world wide were completely and utterly burned by our American parent company. They failed to pay staff for months on end, they withheld super, and didn’t pay up to two million dollars in Tax. Effectively they used the Government and the taxpayer as a bank. Every single Government agency we tasked to help us simply sat on their hands, or could do nothing, because our American company directors were illegally living overseas while running the company. Some months after our American bosses had fled the country with all the intellectual property and not paying a cent for it, after exhausting ALL avenues (Pro Tip : ASIC is the biggest waste of taxpayer money in Australian history), we pled our case to the then Federal Workplace Relations Minister, Ms. Julia Gillard. Unfortunately two weeks later she stabbed Kevin Rudd in the back and became Prime Minister, and never replied to our petition

      The bottom line is, if you want the formula for how to run a digital sweatshop in Australia with zero consequences, I can sell you that formula. The Government doesn’t give a shit.

      Google “interzone the downward spiral” for the full, sorry, pathetic tale, and think twice about this article. If the Government really cared about the IT sector, where were they when some of their taxpayers working on a potentially massively lucrative project (successful MMO games make in the hundreds of millions of dollars) were left out to dry, including their own taxation revenue?

      The problem can be spelled out in three simple word : “Free Trade Agreement”. Australia gives Uncle Sam the right to completely exploit Australia, with zero consequences.

      • MikeK
        Posted 08/10/2012 at 11:15 pm | Permalink |

        Sorry to here about that ( not even slightly amused ) thats a real shitty deal, where you in the workers union. I can only say this, that if Im not payed on pay day, I ring up the union rep and tell him to get his arse over here and clean up this mess.

    7. Posted 09/10/2012 at 5:42 am | Permalink |

      Almost all entrepreneurs will tell you the thing that needs fixing is ESOP.

      In an effort to remove loop holes, Rudd made it almost impossible to form a company here. If you give someone shares in a startup to incentivise them to work with you at the early stage when you can’t pay them a wage, then those shares are valued and the person has to pay tax immediately. The sensible thing is to pay tax when they actually make money – ie. when they sell the shares, but instead, they pay tax when they get the shares.

      Because of this, all Aussie tech companies are encouraged to incorporate in Delaware, and many do, ensuring they are taxed in the US and find it easier to leave Australia.

      If you want innovation in Australia you don’t need the NBN (although it will help). The cheapest and best thing for the innovation economy in Australia is to fix the ESOP problems.

      • Myke
        Posted 09/10/2012 at 5:13 pm | Permalink |

        Interesting.

    8. JD
      Posted 09/10/2012 at 9:18 am | Permalink |

      ps it is the Commonwealth Scientific and Industrial Research Organisation. You forgot the “I”.




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