Australia fails the value adding test: ACS

Australia's inability to value-add to the information technology it re-exports into the Asia-Pacific region will cause an already bad ICT trade deficit (imports versus exports) to blow out to previously unseen levels, according to research commissioned by the Australian Computer Society.

In its gloomiest industry prognosis to date, the ACS Trade Update shows that the ICT deficit stood virtually still over the past year at $14.4 billion in line with near-static IT investment, led by a continuing reliance on imported hardware.

The report author, Professor John Houghton of the Centre for Strategic Economic Studies at Victoria University, said a continuing annual slide on exports value of 2 per cent was cause for grave concern, noting that Australia was one of only three countries in the OECD that were going backwards on this trend.

With re-exports taken into account, Houghton estimates the true figure is more like 8 per cent.

"Of the $2.8 billion in ICT equipment exported from Australia, only 44 per cent was produced locally, with re-exports amounting to $1.6 billion," Houghton said, adding that ICT now made up around 2.5 per cent of total merchandise exports, on par with wool.

Houghton asserted that the deficit has largely been caused by multinational technology vendors removing their manufacturing operations from Australian shores, citing the closure of IBM's Wangaratta plant as a $520 million case in point of how a trade deficit occurs.

"It's not a start-up issue, it’s an investment issue," Houghton said, noting the government could be doing much more to entice multinationals back to Australia's shores.

Those doing well out of the ICT re-export trade include the transport and logistics industry, who have clearly taken to Sydney as a regional hub, with 72 per cent of all Australian ICT imports arriving in NSW before finding their way to mostly New Zealand (40 per cent) or the US (30 per cent).

Australian Electrical and Electronics Manufacturers' Association chief executive Angus Robinson was one voice still holding out hope of a local manufacturing revival, saying Australia still compared very favourably to North Asia and the US in terms of being a low-cost, low-risk manufacturing base for quality, high-end components.

Robinson said this position had to be leveraged forthwith if Australia wanted to start making value-added inroads into the North Asian market, not least China. Robinson said the medical, intelligent building and telematics sectors all represented significant growth opportunities if cultivated.

ACS president Richard Hogg said the IT sector needed to move away from the "propeller head" image if a fall in tertiary IT degree courses was to be arrested - otherwise Australia could face another IT skills shortage within 10 years with only "grey-haired old fuddy duddies like me" left in the industry.

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