commentary If a reminder was needed of the urgent need for a Federal Government response to the Cutler review of Australia's support for innovation, then it has come in the 2008 OECD Information Technology Outlook.
The just-released document is the ninth in a biennial series that provides a broad overview of trends and near-term prospects in the information technology industry.
Business R&D expenditure for ICT goods and services, as a share of GDP, went backwards in Australia
The OECD review provides a snapshot of Australia's relative underperformance across a whole range of measures relating to information and communications technology (ICT).
Value-added in the ICT sector increased as a share of added business sector value in most OECD countries over the period 1996-2006. But in Australia's case it was negative.
During the decade to 2006, many OECD countries showed a declining share of ICT goods in total merchandise exports as those countries which did not specialise in ICT production became even less specialised.
Australia showed a decline in its share of ICT goods in total merchandise exports and its comparative advantage in ICT goods production declined between 1996 and 2006.
As a result of specialisation, developed countries increasingly trade products of the same industries. The most widely used measure of intra-industry trade is the Grubel-Lloyd Index. The closer the value of imports and exports the higher the index. Australia has the second worst Grubel-Lloyd Index ranking in the OECD after Iceland.
At a time of rising expenditures on research and development in most OECD countries, Australia was one of a few countries to report declining R&D investment as a percentage of total OECD area ICT sector R&D expenditures in 2005.
The reversal is explained in a footnote as being caused by the declining activities of Telstra's Research Laboratories, closure of ICT related Cooperative Research Centres and withdrawals of a number of major multinational firms from R&D activities in Australia including Ericsson, Motorola and Nortel.
On a positive note, Telstra is ranked among the top 250 ICT companies in the world. But its decision to rely on overseas vendors for innovation is contributing to a decline in business R&D investment as a percentage of GDP.
Business R&D expenditure for ICT goods and services, as a share of GDP, went backwards in Australia between 1997 and 2005. Business R&D expenditure by selected ICT services industries, as a percentage of GDP, showed no growth in Australia between 1997 and 2005.
The OECD review stresses the strong linkages between research and innovation and the emerging new growth industries revolving around digital content technologies.
It devotes a chapter to the important economic benefits that flow from the provision of high speed broadband infrastructure. It says the development, distribution and use of digitised information have become an essential part of science, communications, business, education, health and almost all areas of production and consumption.
The upgrading of Australia's broadband is two to three years away and may be delayed further by disputes between the government and Telstra.
The Cutler review, which catalogued the dramatic decline in government expenditure on science and innovation, has been sitting on a shelf in Canberra for several months. The government said it would respond with a white paper in early 2009.
This article by Business Spectator's Tony Boyd is reproduced on ZDNet.com.au courtesy of a reciprocal publishing agreement.
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This nation will continue to slide if we don't invoke a massive reversal of its priorities. Australia needs to rebuild its secondary manufacturing industry coupled with a renewed interest in being inventive.
Every time a company says, "let's get a quote from a company in China", we are digging the grave a little bit deeper. Re: research and development, every time we do invent something the patents end up being bought out by the Americans or Japanese. We need to decide what we want now: Do we want a dynamic and vibrant research and manufacturing sector or do we want to only pay $2.00 for everything. We can't have it both ways.