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Growing the Digital Economy in Australia and New Zealand Maximising Opportunities for Smes

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Growing the Digital Economy in Australia and New Zealand Maximising Opportunities for Smes Growing the digital economy in Australia and New Zealand Maximising opportunities for SMEs Joint Research Report January 2019 © Commonwealth of Australia and New Zealand Crown 2019 ISBN 978-1-74037-672-3 (online), 978-1-74037-673-0 (print) (Australia) ISBN 978-1-98-851929-6 (online), 978-1-98-851928-9 (print) (New Zealand) Except for the Commonwealth Coat of Arms and content supplied by third parties, this copyright work is licensed under a Creative Commons Attribution 3.0 Australia licence. To view a copy of this licence, visit creativecommons.org/licenses/by/3.0/au. In essence, you are free to copy, communicate and adapt the work, as long as you attribute the work to the authors (but not in any way that suggests the Commissions endorses you or your use) and abide by the other licence terms. Use of the Commonwealth Coat of Arms Terms of use for the Coat of Arms are available from the Department of the Prime Minister and Cabinet’s website: www.pmc.gov.au/government/commonwealth-coat-arms. Third party copyright Wherever a third party holds copyright in this material, the copyright remains with that party. Their permission may be required to use the material. Please contact them directly. Attribution This work should be attributed as follows, Source: Australian Productivity Commission and New Zealand Productivity Commission 2019, Growing the digital economy in Australia and New Zealand. Maximising opportunities for SMEs. If you have adapted, modified or transformed this work in anyway, please use the following, Source: based on Australian Productivity Commission and New Zealand Productivity Commission data, Growing the digital economy in Australia and New Zealand. Maximising opportunities for SMEs, 2019. An appropriate reference for this publication Australian Productivity Commission and New Zealand Productivity Commission 2019, Growing the digital economy in Australia and New Zealand. Maximising opportunities for SMEs, Joint Research Report. JEL codes: F1, F6, L5, O3, O4. Disclaimer The contents of this report must not be construed as legal advice. The Commissions do not accept any responsibility or liability for an action taken as a result of reading, or reliance placed because of having read any part, or all, of the information in this report. The Commissions do not accept any responsibility or liability for any error, inadequacy, deficiency, flaw in or omission from this report. Publications enquiries Australian Productivity Commission New Zealand Productivity Commission Phone: +61 2 6240 3200 Phone: +64 4 903 5150 Email: [email protected] Email: [email protected] The Australian Productivity Commission The Productivity Commission is the Australian Government’s independent research and advisory body on a range of economic, social and environmental issues affecting the welfare of Australians. Its role, expressed most simply, is to help governments make better policies, in the long-term interest of the Australian community. The Commission’s independence is underpinned by an Act of Parliament. Its processes and outputs are open to public scrutiny and are driven by concern for the wellbeing of the community as a whole. Further information can be obtained from the Commission’s website: www.pc.gov.au. The New Zealand Productivity Commission The New Zealand Productivity Commission was established in April 2011 and is an independent Crown entity with a dedicated focus on productivity. The Commission carries out in-depth analysis and research on inquiry topics selected by the Government with the aim of providing independent, well-informed and accessible advice that leads to the best possible improvement in the wellbeing of New Zealanders. Further information can be obtained from the Commission’s website: www.productivity.govt.nz. Joint study terms of reference Growing the Digital Economy and Maximising Opportunities for SMEs – Joint Research by the Productivity Commissions of Australia and New Zealand Scope of Research At their annual leaders’ meeting in March 2018, the Prime Ministers of Australia and New Zealand commissioned a review into how Australia and New Zealand can work together to remove barriers to growing the digital economy, both between the two countries and into the region, to ensure that the two countries are prepared to seize the opportunities arising from digital transformation. They also commissioned work to identify opportunities for small and medium sized enterprises (SMEs) to make full use of trans-Tasman economic integration. Growth in digital technologies - and availability of the data that supports them - has enabled a range of new business models, products and insights, providing new trade opportunities and opportunities to boost productivity. The Productivity Commissions of Australia and New Zealand will undertake joint research to examine priority areas for growing the digital economy, in particular opportunities for SMEs. In undertaking the research, the Productivity Commissions should explore the extent to which institutional and regulatory settings in the two countries support opportunities for the utilisation of digital technology. In doing so, the Commissions should consider the ability of SMEs to benefit from trans-Tasman economic integration and digital technology, including barriers to entry or expansion and any factors specific to SMEs that might impede them harnessing the opportunities from digital technology. The Productivity Commissions should focus their attention on areas that offer the greatest potential benefits to both economies. The Commissions should commence the joint work in September and submit a report to leaders, through the Treasurer of Australia and the Finance Minister of New Zealand, by the end of January 2019. The report will be published. The Hon Scott Morrison MP The Hon Grant Robertson MP Treasurer Minister of Finance iv GROWING THE DIGITAL ECONOMY IN AUSTRALIA AND NEW ZEALAND: MAXIMISING OPPORTUNITIES FOR SMES Contents Joint study terms of reference iv Foreword vii Glossary ix Executive Summary 1 1 Australia and New Zealand in the digital economy 7 1.1 Why digital matters 9 1.2 If digital is everywhere, where is its productivity impact? 15 1.3 Implications for Australia and New Zealand 19 1.4 Implications for governments 26 1.5 Where this report fits in 29 2 Regulation in the digital economy 31 2.1 Why governments regulate 32 2.2 How do digital technologies affect regulation? 34 2.3 How does regulation challenge digital firms and services? 41 2.4 How do Australia and New Zealand’s regulatory frameworks stack up? 48 2.5 Designing regulatory policy for the digital era 53 3 Government services in the digital economy 59 3.1 How are governments improving their interactions with firms? 60 3.2 How can digital improve government–firm interactions? 64 3.3 From ICT to digital-first, user-centred design 80 3.4 Creating value from public datasets 84 3.5 Looking forward 87 4 The trans-Tasman relationship and the digital economy 89 4.1 Developing policy for a digital trans-Tasman economy 90 4.2 Where to next? 93 4.3 A strong relationship will support the digital economy 109 CONTENTS v Appendixes A Consultation 111 B Data: SMEs, digital technologies, and trans-Tasman trade 113 B.1 The digital economy in Australia and New Zealand 113 B.2 Australia and New Zealand in the global digital economy 118 B.3 Firms in Australia and New Zealand 121 B.4 International trade 126 References 131 vi GROWING THE DIGITAL ECONOMY IN AUSTRALIA AND NEW ZEALAND: MAXIMISING OPPORTUNITIES FOR SMES Foreword We welcome the opportunity to work together again — this time identifying priority areas for growth in the digital economy, including opportunities for small and medium enterprises. In 2012, we jointly reviewed the trans-Tasman economic relationship, which is governed by the Australia–New Zealand Closer Economic Relations Trade Agreement, commonly known as CER. The CER is one of the most comprehensive in the world. Much has been achieved under the Agreement and the subsequent Single Economic Market (SEM) agenda, including elimination of tariffs on goods, facilitation of labour mobility, and regulator collaboration. The digital economy presents new challenges and opportunities for the trans-Tasman economy and for the Australian and New Zealand Governments. Government efforts to lift digital ‘laggards’ or build national digital niches or champions are unlikely to succeed. Instead, our report identifies opportunities for the Australian and New Zealand Governments to strengthen institutional and regulatory settings that will support greater use of digital technologies. This can be achieved by designing regulatory regimes to enable innovation while controlling potential harms, and by improving the efficiency and effectiveness of government services to firms through greater use of data and digital technologies. In doing so, there are opportunities for the two countries to learn from each other while tailoring responses to domestic preferences and circumstances. There are also opportunities to build on the demonstrated success and outward focus of the SEM agenda to advance shared interests in international forums. This can include promoting common global standards in areas where Australia and New Zealand have mutual interests, such as a global rules-based trading system and the elimination of non-tariff barriers. Our report seeks to identify incremental and pragmatic opportunities that complement existing domestic or trans-Tasman policy priorities. Such opportunities exist in the delivery of trans-Tasman
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