Australia is lacking investment in research and development (R&D), according to an IT competitiveness report published by the Economist Intelligence Unit (EIU).
Australia ranked 12th in the world for investment in R&D and fifth for its business environment, IT infrastructure, human capital, legal environment and support for IT industry development.
IBRS analyst, Dr Kevin McIsaac, was not surprised Australia faired poorly when it came to R&D investment.
"R&D in Australia is shocking. The reason for this is that Australia is in the middle of nowhere, we've got a small economy and there are no tax incentives.
"One of the best examples of a country that has provided those incentives is Ireland. As a result, Intel, Apple and others have invested in what was a backwater of Europe," said McIsaac in a telephone interview.
IT industry competitiveness index: Overall scores and ranks. Source: Economist Intelligence Unit, 2007.
According to the report, titled The means to compete Benchmarking IT Industry Competitiveness, for IT producers to excel, businesses need the latest hardware and reliable high-speed Internet access.
Switzerland, Canada, the US and Australia scored highest in the infrastructure component due to their ability to build on long-established telecommunications infrastructures. The report stated that most developed countries have broadband penetration rates equal to or above 20 percent.
Australia received a special mention for its "advanced IT and communications infrastructure" and "IT talent and skills development geared to the future", ranking fourth in the world for its IT infrastructure.
According to IBRS's McIsaac, were it not for Telstra's segmented pricing strategy and Australian consumers' ignorance when it comes to high-speed alternatives -- such as iiNet and Internode -- Australia may have ranked higher.
"A problem when looking at statistics on broadband penetration is that most countries don't have good reporting on broadband penetration and there is no agreement on what constitutes broadband.
"Our problem is the low speed of Internet connections and the high cost that Australians are charged," said McIsaac.
Australia fared well in terms of labour productivity in the IT industry, with overall total output at US$208,014 per employee. Taiwan had the highest productivity at US$386,413 per employee.
Australia also ranked fourth in terms of IT talent, after the US, Singapore, and the UK.