Australia, as well as other advanced economies, is extracting fewer benefits from today’s digital disruption than it has from previous industrial revolutions.
Peter Harris, chairman of the Productivity Commission, made the statement in the introduction to a new research paper outlining the anticipated consequences of digital disruption on Australian markets and competition, workers and society, and the way governments operate.
The paper, ‘Digital Disruption: What do governments need to do?’, provides a broader framework for formal Productivity Commission inquiries into Data Availability and Use, and Intellectual Property Arrangements, Harris wrote.
“With rapid advances in computing power, connectivity, mobility and data storage capacity over the last few decades, digital technologies offer opportunities for higher productivity growth and improvements in living standards. But they also pose risks of higher inequality and dislocation of labour and capital,” Harris said.
Harris also said that the data suggests that Australia, in the company of other advanced economies, has yet to see digital technologies drive significant productivity growth, or to result in substantial disruption at a sector or economy-wide level.
“The open and critical questions are: whether the current economic lassitude is primarily delay before the onset of significant social and economic changes driven by digital disruption; whether government policies (or lack of them) might themselves be frustrating the realisation of the benefits; or whether the effects of this disruption are less fundamental than initially thought,” wrote Harris.
One of the report’s findings was that digital technologies are changing the sources of market power, with control over data and networks “providing new means for firms to hinder entry and extract rent from customers”. The Productivity Commission suggested that new regulatory tools may bee needed to different sources of market power arising with the digital economy, and that aspects of third party access regimes could be explored as a relevant approach.
The report noted that developments in digital technologies, such as sensors and machine learning, will widen the boundary of types of tasks that can be automated, though those requiring perception, or creative and social intelligence, may remain difficult to automate. With many more tasks in the workplace expected to be automated, higher unemployment rates over the longer term may result, and the Productivity Commission suggests that government should focus its efforts on assisting displaced workers rather than providing certain industries with protection or assistance.
The report also said that simply increasing the share of STEM graduates is unlikely to resolve the low rates of adoption of digital technologies by firms.
“Given the relatively high underemployment of STEM graduates and apparent underutilisation of STEM skills, the current approaches are not delivering the problem-solving skills needed for technology-rich work environments,” the report said.
“Beyond delivering a high competency in literacy and numeracy at the school level, initiatives could include reviewing teaching methods, increasing flexibility of university degrees and improving information on employment outcomes for students to help inform student choice.”
The paper also recommended a position on standards relating to digital technologies. While the Productivity Commission suggested that governments do not need to be involved in the development of standards, where they are mandated, they should be the minimum necessary to achieve regulatory objectives, maximise interoperability, follow international standards where practicable and relevant, and be developed in consultation with the private sector.
To download a copy of the research paper, visit www.pc.gov.au.
