Canberra

There have been calls for governments to foster the production of ICTs in Australia, in part to access productivity gains associated with ICTs. However, productivity gains can come through ICT use. Production is not necessary. Moreover, significant Australian production would face difficult market conditions. And there is the question of who would ultimately gain. Compared with other countries, Australia currently has one of the highest accumulated welfare gains from ICTs, because it imports most of its requirements. This paper uses a growth accounting framework to compare the contribution of ICTs to productivity accelerations in Australia and the USA. Using the USA as a benchmark, it attributes up to 0.3 of a percentage point of Australia’s 1 percentage point acceleration in labour productivity growth to ICTs. ICTs have had no net effect on capital deepening, as increased use of ICTs has substituted for other forms of capital. The contribution of ICTs is attributed to gains from business restructuring and innovations in product and process that they enable. The gains to date have been concentrated in distribution (especially wholesaling) and financial services. The evidence of spillovers and network economies is not (yet) strong or widespread. The Australian experience suggests that the central tenets of policy reform — competition, openness and flexibility — have been important in driving the uptake of ICTs and assisting firms to use them in productivity-enhancing ways. This approach ⎯ focusing on the conditions in which business operates ⎯ has taken Australia toward the international forefront of ICT-related productivity gains and well on the way to getting the most welfare gains it can from ICTs. Acknowledgements and disclaimer