No biggie if Aussie IT tanks: RBA

No biggie if Aussie IT tanks: RBA

Summary: Reserve Bank Governor Glenn Stevens has waded into the debate about whether Australia needs a strong home-grown IT sector, claiming the nation hasn't been disadvantaged by failing to grow one since the dotcom bubble burst a decade ago.


Reserve Bank Governor Glenn Stevens has waded into the debate about whether Australia needs a strong home-grown IT sector, claiming the nation hasn't been disadvantaged by failing to grow one since the dotcom bubble burst a decade ago.

Over the past few months the issue of how Australia should attempt to grow a powerful technology-based economy has been at the forefront of the industry's mind, due partly to the Labor Government's focus on "digital economy" outcomes spurred by its massive investment in its flagship National Broadband Network project.

Several seed funds have been launched with the aim of boosting the IT start-up sector, and even industry warhorses such as Intel have been discussing how investment can be brought down under. However, in a speech to the Australian Industry Group's Annual National Forum today, Reserve Bank Governor Stevens poured cold water on the whole idea.

"Ten years on," Stevens noted, referring to the dotcom bubble and bust, "it does not seem to have been to Australia's disadvantage not to have built a massive IT production sector."

On the contrary, Stevens pointed out Australia's terms of trade were currently at a 60-year high, and the national currency was close to equalling the American dollar. Investment in the resources sector was also booming.

"In the area of information technology, meanwhile, the pace of change continues to be rapid; prices continue to fall, profits have proved very hard to come by and a number of prominent names from 2000 have disappeared," he added. "It is still better, it seems, to be a user than a producer of IT."

Stevens' comments did not appear to be directly targeted at slamming Australia's IT sector or its development. Rather, he appeared to be putting the idea in context that forecasting the future was quite hard to do, especially in situations such as the dotcom bubble, which had delivered an incredible amount of hype into the business community.

"Australians were told by more than one prominent visitor that we lived in an 'old economy', with the implication that we needed to shift towards the production of IT goods," said Stevens. But the reality didn't match the hype. "Blue-sky valuations were being applied to companies that had not, at that point, earned a single dollar of profit (and many never would)," he added. The economist referred to what appeared to be a speech given at the time by Tim Harcourt, the then- and still-chief economist of the Australian Trade Commission.

In the speech, Harcourt referred to what he said was the notion that Australia had an "IT deficit": in short that Australia was a good user of IT goods but did not produce many.

Harcourt argued that in fact, the nation shouldn't worry about the IT deficit, for several reasons. Firstly, he said, Australia ran large trade surpluses in some areas, such as agriculture and mining, that could fund deficits in areas like IT production.

Then, too, while Australia was not necessarily good at manufacturing IT products, it was good at services, which could be built around such products. And IT was, in general, embedded in the economy anyway, through such mechanisms at the time as "e-commerce servers" and internet usage.

"Economies are not static machines," said Stevens today. "They are a complex and dynamic combination of actors, all continually seeking to adapt to changing conditions. That is one reason that economic outcomes are very hard to predict, and why I am circumspect about predicting 'Australia to 2020'."

"No one can give you a blueprint for which areas will succeed and which will not, any more than the pundits a decade ago, at the height of the 'new economy' fad, could foresee the shape of Australia's economy today."

Topics: Government, Government AU, Start-Ups, Tech Industry

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  • Of course there is no need for high technology in this country! As long as we have mindless goons drilling, planting, mining every last natural resource of this country - we don't need anything else.

    Countries that excel at technology have the following traits : They have strong educated workforce, and they either have little natural resources or do not want to depend on them.

    Australia has neither. We don't invest in education and we want to keep mining. So we have the nation filled with jocks making holes in everything they can find. They don't "understand" the concept of "infrastructure investment" and "education policies".

    So be it. Let is import more skilled migrants to do the jobs that we are not good at, while every four years have debates over migration policies.

    We'll go from being the smart nation to rich, dumb one.
    Azizi Khan
  • We might be a dumb nation, but we certainly ain't rich these days
  • There you go, I thought a reserve bank governor would be able to think, and perhaps count. Apparently not. This man should get his facts before making stupid unfounded remarks about an industry he knows nothing about.
    As a company founded just before the IT meltdown I ripped up about 100 business cards of IT companies that went out of business. Most of these passionate and intelligent individuals lost their houses in the process.
    Not much is said about the US4.9 billion dollars that US brokers took from stupid greedy people who don't understand that 500 to 1 valuations only work if no-one else enters your space. How many of these suckers ever saw a business plan or an I.M before parting with their cash.
    The effect on the local I.T population was the mass exodus of professionals who left our shores to become managers of offshore businesses. Brain Drain.
    If he thinks that the Queensland government should have sent $400-500 million offshore to a yank company, no doubt outsourcing to India, for a product that any Aussie company could have done, right first time, for a tiny fraction of that cost he should not have his job.
    Australia has an almost criminally lazy resource based economy which ignored one of the biggest cash-cow industries the modern world has ever known.
    Pretending it didn't happen infuriates myself and the whole Australian I.T community.
    If, like America, Australian companies and government were forced to offer projects to Australians and a tax levy placed on off-shore development and outsourcing we would then be able to call ourselves a truly clever country. Were not now!