Federal Opposition Treasurer, Joe Hockey, has delivered a half hour sermon on Australia’s dire need to boost productivity, arguing that the freeing up of capital for business investment, rather than the Government’s investment in its National Broadband Network (NBN), would be more beneficial to the country.
In the speech, delivered at the National Press Club, Hockey drove home the news that Australia’s productivity was expected to slow from a peak of 1.7 per cent in the 2000s to 1.5 per cent over the next 40 years.
“If this were to pass, it would mean Australians on average were not increasing their material standard of living as quickly as they had done in recent decades,” he said.
However, while companies continued to do more with less in an effort to remain competitive, Government could assist in this process in through ensuring that community infrastructure, both privately and publicly owned, was adequate and efficient and through ensuring the availability of capital for private business.
“The Government should not be competing with the private sector for scarce capital, especially once business returns to the markets,” Hockey said. “….The crowding out effect of government borrowings is particularly acute for small business. Unlike the big end of town they do not have access to the equity markets to raise additional new capital.”
Hockey also took a swing at the Government’s NBN, arguing that Government investment in infrastructure should be subject to publicly released cost-benefit analyses.
“In this respect I note that Gary Banks, the chairman of the Productivity Commission belled the cat when he noted that the benefits of a publicly available cost benefit analysis 'are potentially large' for the Government’s $43 billion national broadband project,” he said. “That is of course a project the Government refuses to conduct a cost benefit analysis on.”
The Shadow Treasurer also commented further that the Government could increase productivity through lowering the cost of compliance by business with government regulation.
Hockey did, however, not detail the way in which a national broadband network could increase productivity and competition – something which the World Bank and the Organisation for Economic Development (OECD) – two of the world’s most reputable economically-focused intergovernmental bodies – have cited as lifting productivity.
As reported by <i>Computerworld Australia</i> one recent World Bank study of 120 countries found that for “every 10-percentage-point increase in penetrations of broadband services, there is an increase in economic growth of 1.3 percentage points”.
Other research by McKinsey & Company similarly concluded a 10 per cent increase in broadband household penetration produces a rise of 0.1 to 1.4 per cent in gross domestic product (GDP) growth.
Booz & Company meanwhile suggested countries that have higher broadband penetration rates have achieved up to two per cent higher GDP growth than those with lower penetration rates.
In Australia, a 2002 report commissioned by the then National Office for the Information Economy (now the Australian Government Information Management Office or AGIMO) by the Allen Consulting Group, estimated broadband would add 0.6 per cent to Australia’s GDP growth rate each year through 2005.
Australian research organisations such as NICTA and the CSIRO have also argued the productivity benefits of the NBN.