Australia, and particularly its services sector, stands to reap a significant productivity dividend from further development in online services, AI and analytics, with Federal and state governments urged to support industry in unlocking and utilising data assets, according to the Productivity Commission’s 5 Year Productivity Inquiry: The Key to Prosperity interim report.
Data, digital technology and cybersecurity, as well as a “high-skilled workforce” and a “productivity-friendly business environment”, were identified in the report as key enablers of Australia’s innovation and productivity growth.
These productivity enablers were described as the most relevant to the country’s “current context”, which included a “rising services sector”, “the challenge of decarbonisation”, and “continued openness… to the world”.
While an increased digital capacity could deliver a productivity dividend, particular for the services sector, the report said, this would require a higher degree of adoption, by both government and businesses, of innovative business models, a skilled workforce in non-routine tasks, and better access to data, much of which was collected through businesses reliant on funding or regulation of governments and must not be “unduly locked down”.
Given the recovery from the Covid-19 pandemic, which hastened the adoption of digital technologies that could ensure the economy could continue to function, the Commission’s report stressed the importance of “maintaining momentum in the use of data and digital technologies”.
“The adoption of digital technologies constituted a massive productivity boost, relative to a counterfactual scenario in which such technologies did not exist or were not adopted en masse,” the report said.
“However, the uplift in online capacity (among both businesses and households) combined with a broader embrace of the innovative potential of digital technology, can transform the way the economy operates — services in particular — with significant productivity benefits.
“The challenge will be to ensure that policy settings are sufficiently flexible and incentives are appropriately calibrated to support continued uplift as the Covid-19 recovery continues.”
Additionally, according to the report, Covid-19 highlighted pre-existing productivity bottlenecks in both the private and public sectors, and in some cases underlined how quickly and easily some of these (arbitrary) bottlenecks could be removed by embracing online service delivery.
According to the Productivity Commission, embedding these changes into businesses’ and governments’ operations would consolidate the longer-term productivity dividends from online activity and services.
Further to that, in the government subsidised healthcare sector, the pandemic highlighted the lack of flexibility around the delivery of some services.
The report found that “widespread take-up of ‘Telehealth’ consultations, access to which had been heavily restricted under the Medicare Benefits Schedule funding guidelines prior to March 2020, showed a willingness amongst consumers to engage with telehealth across a variety of services.”
As far as data was concerned, the Productivity Commission noted in its report that the large volumes of data produced by an “increasingly digitised and services-oriented economy” could be used to improve productivity and there were good examples of effective data use during the Covid-19 response. However, Australia fared poorly in its use of data-driven technologies when measured against international counterparts.
“Effective use of data to improve productivity goes hand-in-hand with the widespread adoption of the digital technologies that draw upon and ensure the safe use of data. But while Australia compares well internationally as a data producer and consumer (Chakravorti, Bhalla and Chaturvedi 2019), it performs poorly in its use of data-driven technologies, such as artificial intelligence and data analytics (OECD 2022a, 2022b),” the report said.
The Productivity Commission urged not just for the creation of data, but for government and industry to make active use of data assets.
The Covid-19 policy response provided examples where data was effectively used to improve health and economic outcomes, but there was a great need for” consistent quality near-real-time data to inform rapid decision making in a range of public services (such as health, public safety and employee financial support) and commercial services (including logistics and supply chain management).”
“The challenge for Australia will be to build on this momentum and accelerate data use in other sectors and contexts, so that we can maximise the value gained from data produced in our increasingly digitised and services-oriented economy.”