Treasurer Josh Frydenberg has urged Australians to “embrace” the digitisation of the economy, saying the “tide of technology” cannot and should not be stopped.
Digitisation is one of those things we talk about all the time, without ever really stopping to consider what it means.
Essentially, it is a blanket term for the increasingly rapid advances in technology around us and how they are changing the products we buy, the businesses that serve us, and pretty much every other aspect of our daily lives.
Those touchscreens McDonald’s brought in to take your order for you? Digitisation. The app that tells you when your train is coming? Digitisation. The local dry cleaner taking payment by card instead of cash? You get the picture.
This digital transformation is so ubiquitous that you barely register it happening around you, even as it accelerates.
“We’re living through the fourth industrial revolution. The first was the steam engine, the second was electricity, the third was the computer and the fourth is big data and artificial intelligence. It’s affecting everything,” Mr Frydenberg told news.com.au.
“We have 80,000 Uber drivers in Australia servicing more than four million Australians. That has disrupted the traditional taxi system as well as how service providers appeal to their customers and manage their customer base.
“In energy, 20 per cent of homes are generating power with solar panels on their roof. The Internet of Things. Peer to peer training in power. There’s a whole lot of new technologies there which are disrupting the energy industry.
“In transport, and mining — if you go to the Pilbara, they’ve got autonomous vehicles and trucks and trains, and they’re being controlled in Perth 1500km away. That’s dramatic.
“This ACCC report into the digital platforms showed how dominant Google and Facebook are in the online advertising market. And also the amount of data that they consume and build on us.”
The benefits of digitisation are obvious enough. Even putting aside the added convenience for customers — I, for one, am quite partial to having food from my favourite restaurants delivered to my door — it has all sorts of positive effects on the economy.
A report by Data61 estimated improvements to existing industries, and the rise of new ones, would add as much as $315 billion to the economy over the next decade.
And digitisation should help address one of Australia’s most urgent economic challenges — the recent slowdown in productivity growth.
But there are reasons to worry as well.
The Digital Platforms Inquiry Mr Frydenberg mentioned revealed just how much power is now held by a small group of tech companies, Google and Facebook prominent among them.
Those companies, and how they use the data they collect from users, raise massive concerns about privacy and the concentration of economic power.
Mr Frydenberg believes those concerns can be addressed without resisting the broader digitisation of the economy.
“I think you can’t stop the tide of technology. Nor should you,” the Treasurer said.
“You need to embrace it but also need to have a clear sense of what your priorities are and what your values are. So for example, protecting privacy is important. Protecting the integrity of our tax system is important. Ensuring continued competition against excessive, dominant market power is important.”
The Federal Government released a new strategy addressing digitisation in December of last year.
“We need to maximise opportunities from digital technology across Australia, and this report identifies key areas to focus on,” Industry Minister Karen Andrews said at the time.
“First and foremost, the Government is focusing on people. Getting digital skills and infrastructure right allows us to connect people and places and to improve productivity, sustainability and adopt new technologies.”
She said the Government would continue to assess Australia’s “digital performance”.
Earlier in his interview with news.com.au, Mr Frydenberg explained why the Government was resisting calls to further stimulate the Australian economy despite worryingly “soft” growth in the June quarter.
The Treasurer said he would “continue to watch things very closely”, but at the moment, there was no need to do anything drastic.
He highlighted two major policy areas — tax cuts and infrastructure spending — where the Government was already stimulating the economy.
“The tax cuts are very significant. More than $16 billion has made its way from the ATO into the pockets of hardworking Australians for the 2018-19 year,” Mr Frydenberg said.
“We’ve got a pipeline of infrastructure spending. But returning the Budget to surplus is important because a surplus is never easy. And the Labor Party can talk all they like about surpluses, but we know they haven’t delivered one since the Berlin Wall was standing.”
You will get up to $1080 back on your tax return this year under the Government’s tax cuts.
Because they weren’t implemented until July 1, whatever stimulatory effect they might have did not show up in the June quarter results.
The risk, from the perspective of the broader economy, is that you will decide to chuck that extra thousand bucks into your savings account or pay down your credit card debt instead of spending it.
That possibility looms even larger when you consider that Australia has one of the world’s highest levels of household debt.
Mr Frydenberg, however, remains optimistic.
“While some people are retiring their debt, others are spending it in the community,” he said.
“It’s the people’s money. They are entitled to spend it as they see fit, on their own priorities. Some will pay down their mortgage. Others will spend it with the local tradie, or take a local holiday, or go to the local shopping strip. That’s a choice for the public — and the Reserve Bank has said it will boost disposable income.”
The Treasurer also expects the Reserve Bank’s two recent rate cuts to help stimulate the economy.
“The 50 basis point rate cut from the RBA is helping to stabilise the housing market, and that has an impact,” he said.
Again, there is reason to temper our expectations.
The official cash rate is already at a record low, and there is a broad expectation it will be cut again before the end of the year. At 1 per cent, it can’t go much further down — meaning that lever could soon become far less useful.
“Lower interest rates are a global phenomenon. Central bank governors are dealing with the relatively unique situation where they’re seeing low unemployment, low inflation and low interest rates and trying to manage all three,” Mr Frydenberg said.
“Monetary policy is the remit of the independent Reserve Bank. I’m focused on fiscal policy. What I would say is that the 50 basis point rate cut has made a difference in the housing market, and our tax cuts and our infrastructure spending are making a difference on the fiscal side.”