Thankyou Mr Chairman. Thanks for inviting me today to share the rostrum with Dr Terry Cutler to talk about Australia's future in the information age because I think those of us here would certainly agree that it's an important facet of our future. The information industries are the providers of the information infrastructure - a key enabler of industries and society across Australia and they are increasingly our link to the world. Australia has a lot going for it with its information industries. They are already one of Australia's most significant industries, and the information industries contribute more to Australia's gross domestic product than the agricultural, forestry and fishing sectors combined or the mining sector.
Unlike these commodity based sectors the information industries are growing rapidly. Over the past five years the industries' turnover increased by 12 percent per annum, and some segments of services and content are growing at a rate in excess of 20 percent per annum. In 1995 the information and communications sector in Australia generated revenues of some $33b. As most of you would be aware, the industries export over $3b per annum and Australia already earns more in exports from this industry than we do from wheat or sugar or woodchips or motor vehicles. I suspect that the size and importance of this sector is not widely recognised. That is the reason why I mention those figures.
The Information Industries Taskforce was established by John Moore, Minister for Industry, Science and Tourism, in September and the Taskforce's role is to develop a national strategy for the information industries. In undertaking this task we are looking at what is happening internationally as well as in Australia. We are assessing the industry policies and programs that are currently in place, including the Partnership for Development program and the Computer Bounty. The Taskforce has been specifically asked to advise on whether alternative industry assistance is required, once the Bounty ceases at the end June next year.
The Taskforce has a very wide brief and is working to a tight timetable. We will provide the government with our preliminary advice in February, largely to ensure that certain key issues are addressed in the Budget, and the Minister has requested a final report by April next year. While the work of the Taskforce will be completed by April, it is already clear that the development and implementation of a national information industries strategy requires a long term commitment from Australian governments at the Commonwealth, State and Territory level, as well as by industry.
There are three key inputs into the Taskforce. Firstly, the Taskforce members themselves and these are all business leaders, in fact they're all ceos from a cross section of the IT&T industry. They represent small and large, multinational and indigenous firms. Second, the views and ideas of participants in the information industries and users of these technologies and services, and the Taskforce has sought submissions from a wide variety of interests, specifically including the media, and is conducting seminars across the country to help gain these views. While the initial date for submissions has past we will continue to accept submissions into the new year. I really urge, encourage, even plead with you. If you have any ideas or proposals to please submit your ideas to the Taskforce because our recommendations will only be as good as the ideas that are put to us. The third major input into the Taskforce is the Information Industries Competitiveness Study that is currently being conducted by a consortia of industry experts including Dr Cutler's group. The Information Industries Competitiveness Study will provide on a national, regional and global basis, a rigorous assessment of the competitiveness and strategic opportunities facing the Australian information technology, communications and multimedia sectors. The consultants will be reporting to the Taskforce in late December. They have done a tremendous amount of interviewing at firm level, not only in Australia but overseas in places like Singapore, Malaysia, and European countries as well.
Australia has a number of highly innovative local firms that are taking Australian developed products and technologies to regional and global markets. Australia recognised very early the global nature of the information industries. We have welcomed the investment of multinational firms into Australia and our multinational partners are among Australia's leading exporters and investors in R&D.
The information industries are creating jobs at a rate of growth exceeding many others. The rate of jobs growth in IT occupations in the information industries was 10 times that of job creation over the whole economy between '89-90 and '94-95. There are over 160,000 people employed in the sector, which is more than that employed in mining.
The information industries are unique and this is what makes this review particularly important. They are not only a strong growth industry in their own right, but they are essential enabling industries. They underpin, or have to the potential to, the global competitiveness of practically every business in this country. Australians have been eager to embrace and have been rapid adopters of information and communications technologies. One survey has Australia second only to the USA in pc penetration of a per capita basis. We rank third on Internet host per 100 people, again behind the USA and Sweden. Australia is also ahead of the USA on mobile phones. I'm not sure whether this is an indication of Australia's IT sophistication or just our sense of fashion. I'm hoping that the environmentalists will soon latch on to the noise pollution being created by these infernal devices and do something about them. There hasn't been one ring yet but I'm absolutely certain that before the end of the meeting they will.
While the penetration of the Internet holds substantial promise for the future, we have only reached the tip of the iceberg. Australian business is yet to embrace the opportunities afforded by these technologies. US firms are already selling their wares into Australia via the Internet and we really do need a strategy to wake up Australian business as to the opportunities and the threats that arise from that. In doing these there is a need to address a major impediment and this has already been raised many times in our discussions with industry and this is the prohibitive cost of access to bandwidth in Australia. Australia's telecommunications tariffs are just non-competitive. While there are a number of positives going for Australia we cannot afford to be complacent.
Despite the sector's strong export growth, Australia has a trade deficit increasing rapidly and it now exceeds $6.5b. This is a global industry and we must be able to compete for investment. Australia has had the advantage of being the second largest IT&T market in the Asian time zone. We have had advanced telecommunications infrastructure by comparison with other countries in the region and in the past this has been a factor in our ability to attract investment. What had been our regional markets are about to become our competitors.
By the year 2000, which is just over three years away, it is predicted that Australia will slip to being the fourth largest IT market in the region and will continue to slide because of the constraints on our population size. We need to encourage investment that is scaled to meet the demand of the region and not just our domestic market. Australia as a location for investment by IT&T firms is under increasing pressure from other markets. Countries such as Malaysia, Indonesia, Korea, Israel and even Ireland, Scotland and Wales are using a combination of incentives and arm twisting to encourage multinationals to invest. Two very recent examples: Indonesia has mandated a 30 percent local content requirement for sales to telecommunications carriers and Malaysia has provided a 100 percent investment tax allowance and other incentives for multimedia investments.
Here in Australia the Information Policy Advisory Council under Dr Cutler and the Information Industries Taskforce will hopefully be developing Australia's strategy for the next millennium. In the seminars that we have already conducted the industry has indicated that it is not looking for massive handouts, it is not looking for handouts. They are not asking the Australian government to put up barriers to free trade but they are looking for support of the government to help them compete in those markets that do have barriers. In information industries that is most markets around the world. The industry wants a competitive business and technical environment. Investment is required to enhance our skills base and encourage innovation. Obtaining finance is a problem for smaller firms in the industry and has been for as long as I can remember. The industry is looking for a national policy that governments across our country will be committed to.
We have developed a list of policy principles for the information industry strategy. These are preliminary and we'll continue the refinement but we see that recommendations that we're going to make as within the framework of these principles: firstly, that the policy framework must be strategic, there must be visions and goals for the long term. There needs to be a policy partnership, government with industry and a proactive government leadership. The recommendations need to be pragmatic and to recognise the playing field is at it is and not as text book orthodoxy would have it. We believe that government is not in the business of backing winners but is certainly in the business of backing business. We believe that there should be a fundamental reciprocity. This has made the press in recent times in relation to APEC, but we're talking about not giving away advantages unless we get something in return. Leverage of industry by government such as government purchasing and outsourcing we see as important. We believe that it is important to try and bring together to enable us to compete internationally what is now competing state activities in attracting information industries to their particular state. We need to address investment facilitation. How the next point is handled in a democracy I'm not quite sure but one message that has come through very clearly is that unless you can establish a policy framework with some continuity and permanence, there's a lack of confidence in industry, in investing and we need to overcome that particular issue. We hope to work very closely with the Information Policy Advisory Council because we are working towards similar goals to position our nation and our community for the information age.
The challenge before us as we move into the next millennium is whether Australia will just be a technology taker, or whether we will be a developer and supplier of information technologies and services to the region and across the globe. Will Australia take advantage of its lead as one of the world's early adopters of information and communication technologies and where will we be as a nation by 2010.
The Information Industries Taskforce has been given the responsibility for developing a strategy that maximises the opportunities for the nation but we can't do it alone. As I said before we need your submissions, your ideas to enable the Taskforce to build a strategy which will be of use and value to this nation in the years to come.
Thankyou, Mr Chairman.
D'Arcy: Dr Cutler, your turn to bat.
Dr Cutler: I would like to begin by thanking this forum for giving me my first opportunity to appear in public wearing my hat as chairman of the Information Policy Advisory Council, or IPAC as we like to call it.
Over the last few years governments and industry in Australia has produced quite a shelf full of reports about the information revolution and multimedia and online services. There has been a lot of talk. So far there has been a distressing lack of action and continued talk without action is the last thing we need. So the first thing I want to emphasise is that what we do with online services, the Internet, with multimedia matters, matters a great deal. We should accept, we should now take it as a self evident truth, that the world we operate in has changed forever, has been changed by the impact of new electronic interfaces on all aspects of communication the impact of electronic interfaces on what is now completely interdependent, completely networked economy is today's world. So I see the transforming reality of these new electronic interfaces is not a matter for any further debate or dispute. Those who try and emulate King Canute and try and turn back the tide of change are going to be drowned pretty quickly. The question for today therefore is what we make of these new networked realities. While these electronic interfaces progressively almost without us really noticing becoming more and more embedded within our economic and social systems I think it is still far too easy for us to underestimate the fundamental importance of what is happening.
Starting by emphasising why all this matters I suppose is also an apologia for why I agreed to take on the job of chairing the Information Policy Council. Today we estimate that information, communications technology and services if you add in everything including networked content already account for some 10 percent of GDP. This sector, therefore, is worth if you add everything together somewhere between $50b and $60b today. As Professor Goldsworthy has already reminded us it is also one of the fastest growing sectors of the economy. In the information industries competitive study, which we have already had reference to, we estimate that an average overall growth rate of about 15 percent per annum. We are talking about direct inputs into the economy of well over $200b within a decade. The impact of this sector of course is much wider than this and we know very clearly now that the information and communications services areas have become the main driver of sectoral adjustment and competitiveness right across the economy at large.
This reality was brought home to me recently in an article from the Interactive Edition of the Wall Street Journal, which argued - and it was quite a cute argument - that most of the US economy's current growth of around four percent per annum can be attributed to the new market capitalisation of Internet-based value creation, with direct market expansion of over $200b US over the last 18 months. From my work on the Industry Research and Development Board, we know that new technology based firms are the prime source of job creation and innovation in the US and in Europe.
So, one of the challenges with the online economy is one of building within Australia this same sort of culture of innovation and entrepreneurship. What we're really good at in Australia, where we are really innovative and where we continue to congratulate ourselves, is that we are innovative in the way we use things, whether it is the Internet or mobile phones. But I'm not sure that we are so innovative in the way we produce things. Our financial institutions continue to be reluctant to fund new ideas, we yet do not have a venture capital industry to support startups. Both government and business I think actively need to make innovation, the commercialisation of ideas and all the R&D we do, the funding of new ventures in this online world, the top priority. This is not just a bit of industry special pleading, I think this is an economic imperative and therefore a community imperative as well.
The basic challenge, as Professor Goldsworthy has already highlighted, for Australia is whether we are going to lead or follow in this online revolution. Will we as Australians be avid consumers of other people's innovation and online content, or will we aim to grasp our share of production into this new global market.
We are not badly positioned and we do have some natural advantages. As we have already heard, we have the strongest online base outside the US, we have relatively good skills per capita, we do have the unique advantage, perhaps, of the world's most extensive cable roll-out, a superb platform for leading edge applications development. Isn't it amazing that all we hear about this cable is whether it should be black or grey, and where it should be underground. However, if you talk to US firms in this area, what we are doing with cable is all they want to talk about because they see it as a superb platform for applications development and a real magnet of attraction for direct investment of that effort in Australia. It would be criminal if we let this opportunity pass us by.
So, we do have some promising positioning but we need to do something different if we are to have any chance of success. We need to address some of the real problems. Some of those problems are: the attitude of many of our corporations, the myopia, the lack of attention to these new opportunities at a senior management and board level. The lack of venture capital, as I have mentioned, and the very subscale nature of the promising content development we are doing in this country is still too small scale to really matter.
IPAC could never be, could never presume to be, the whole answer to this challenge but I hope that it can become a major catalyst for action.
So just let me briefly outline what we see IPAC being on about and how I think it can have some influence and add some value. The first issue is getting the right team. I am very pleased that with the Council we have brought together 17 remarkable people in terms of leaders in their own areas but more importantly they're doers from across a broad spectrum of the economy and the community. It is truly a Council that is going to be more than a sum of its parts. And it was great at its first meeting and very refreshing just the spirit of passion around the table about rolling our sleeves up and doing something. Nonetheless we recognise that no council can be complete in itself, so I'll be working to build a wider forum through including others in working groups and other mechanisms.
IPAC's primary role is to provide advice to the government on matters relating to the online economy and online service developments. We see our job as one of developing and recommending strategies which are action oriented and capable of generating positive and concrete outcomes for the industry. Above all we hope that we can focus the government and industry's attention on accelerating development and growth. I believe that where IPAC can add some value is by trying to focus attention on those key issues that really do matter, that will make a difference. The broad agenda for the online economy is pretty self-evident, at least to an audience like the one here today. We can recite the list of issues fairly easily: access issues, development of electronic commerce, privacy, security, authentication, encryption, intellectual property, content regulation and so on. The real trick, the real challenge is to identify those aspects of these issues that are most critical for the success and early growth of this sector in Australia and to make sure we get those aspects right.
While IPAC is not in the business of making government policy - they haven't quite outsourced it that much yet - there are a lot of things that I hope we can do to influence its direction. We'll be focusing on trying to set out for government the options and the trade offs with what are often very complex issues in a way that we hope might improve government approaches to formulating policy and the way it administers whatever regulations it might put into place. We can also work to ensure that government doesn't lose the big picture, but to keep a focus on the upside opportunities that are emerging. So where do we start, what are IPAC's priorities for the next six months or so? At our first meeting there was remarkable agreement around the table. We all agreed that we needed to be very proactive and to encourage government to be very proactive in actively promoting and supporting Australia's online industry and its network community. We are all very nervous about knee jerk, ill considered calls for government to take a negative stance and regulate everything that squeaks slightly. IPAC's recommended strategies, therefore, are likely to encourage a considered but rather cautious approach to the recourse through regulation and control. Secondly we believe that it is important for the Council, and in particularly the government, to recognise that this is a rapidly moving and changing sector that simply doesn't allow time for leisurely deliberation, long lead times or protracted time tables for the introduction of government measures. There is something very relevant at the moment when we look at the timetables for some measures before parliament. We will continue be reinforcing this need for fast action to the government. Perhaps we should also bring this to the attention of the Senate. Thirdly we see huge potential for improving Australia's sense of community by putting the human communication, the human interaction aspects of all this back into the information revolution. We see our job as not being about technology but about how we as people and as industries use that technology. Consequently we in the Council have a firm view that we need to focus on services and applications, the demand side the equation, and not on the technology issues per se.
There are a couple of other areas where we see IPAC playing a role. One is that when you look around there seems to be a lot of activity, a lot of it fragmented activity, across the commonwealth and also within some state governments. But there is very little sense in how this all adds together in terms of an overall strategic direction. We believe that the Council can assist in promoting a clearer, more whole-of-government approach to this sector. We have also noted that as Australia, along with the rest of the world, moves into an online, networked economy, it and the government face the challenge of well informed risk management. We'll be looking at ways in which we can advise the government on approaches to managing the risks with some of the emerging developments and new opportunities while never loosing sight of the upside opportunities.
We have welcomed the fact that the minister, Senator Richard Alston, has issued two initial references to IPAC on which we expect to report to the government. Let me say that these also reflect strong priorities of the Council itself. The first of these references is to investigate issues affecting the roll out of online infrastructure and services deployment in rural and regional Australia, and the second is to assess the issues affecting the deployment of information and communications services within the services sector, particularly in retail, eduction, finance and entertainment.
Looking at what is holding back the productivity gains, the opportunities and these industries and where are the greatest potential gain. Here we will be building on work that has already been done and coopting the participation of the Australian Coalition for Service Industries. The Council is now establishing working groups to investigate these issues which will include IPAC members but also other industry people, research organisations and other community groups, and it will be reporting back to the government on these matters before May of next year.
IPAC also considers issues of online security and encryption of sufficient importance and have asked the minister to formally refer these matters to IPAC.
In another area we have decided that to get a better understanding and to communicate a better understanding of some of the issues that are assisting or hindering the development of online services, particularly content development, we are going to prepare a hypothetical case study of a content development enterprise. I see this as a very key area for us to focus on because as I said earlier I believe we are still very sub-scale in the area of actual online content development. We're also preparing a discussion paper seeking to identify and looking at how we might maximise the points of leverage in the Australian market, some of the things that we have already mentioned such as the rollout of broadband networks, the rapid takeup of technology by Australians and the high use of the Internet which we've till got to convert into actual business opportunities.
In addition to all of this, IPAC will be responding, has been asked to respond, to a number of current issue papers from the government such as the cross media inquiry, the issue of privacy protection, and the government's approach to content regulation. So you can see we are going to be fairly busy.
We look forward to pursuing these tasks with a very high level of interaction with the wider industry and community and of course one way, if we practice what we preach, is to do this through the Internet. I hope that our Web site will become a major vehicle for communication. So if any of you are curious about what we are up to just regularly look up www.ipac.gov.au. The site is still at a relatively early stage of development but we are trying to make it much more interactive because we see this as a vehicle where you can work with us.
To conclude, I hope that we can develop IPAC so that it becomes an important conduit between industry and government, between industry and industry, and between industry and the community, to be a catalyst for the better understanding of these key issues, these fundamental issues and their impacts. We hope we can try to anticipate and head off inappropriate and knee jerk reactions by the government in areas such as content regulation and security, so that in the end IPAC will be trying to work to remove all the alibis for inaction, so that we can make sure that decision makers no longer have excuses such as ignorance for not acting.
I look forward to having a continuing dialogue will all of you over the years to come. Thankyou.
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