NBN and new digital technologies to shape Australia’s future productivity and economic growth

Improving productivity growth is a key priority for the Morrison Government, with the NBN rollout a key part of that, Federal Minister for Communications, Cyber Safety and the Arts, the Hon. Paul Fletcher has said in an address at CEDA’s State of the Nation conference in Canberra.

“We know that boosting productivity is key to driving economic growth, lifting wages and raising living standards,” he said.

“Australia is one of the world’s more productive economies, but as Treasurer Josh Frydenberg pointed out recently, productivity growth has slowed in recent years, particularly compared to the very good years of the 1990s.

“Our growth rate was 1.1 per cent a year over the last five years – below our long run average of 1.5 per cent.

“According to the Productivity Commission, 2.5 per cent of growth in our GDP – or $20 billion – came from microeconomic reforms in key infrastructure sectors in the 1990s.

“Improved communications infrastructure similarly can deliver productivity benefits – particularly because communications is a key input for other sectors.

“In 2016-17, around $766 billion of economic activity, or around half of the economy, relied upon services from the communications sector.”

Mr Fletcher said that research shows that in NBN connected regions the number of new businesses grew at one per cent, twice the national average and five times the rate in non-NBN connected areas.

“In regions connected to the NBN, the annual growth in digital economy jobs was 4.8 per cent, versus -0.2 per cent in non-NBN connected areas,” he said.

“There is in turn a clear link between the take up of digital technology and productivity improvements.

“Further adoption of digital technologies could see Australia’s GDP increase by $140-250 billion by 2025.

“In the agricultural sector alone it has been estimated that effective use of digital technologies could increase the gross value of Australian agricultural production by $20.3 billion – a 25 per cent increase over 2014-15 levels.”

Mr Fletcher said that there are currently 10.2 million premises in Australia able to connect to the NBN, with around 5.9 million currently connected and a typical uptake of nearly 40,000 premises signing up each week.

He said that it was important that the economic gains from the investment to the nation be maximised, with the NBN a key part in ensuring Australia’s small and medium businesses remain competitive, innovative and profitable.

“NBN is enabling new ways of working around the country,” he said.

“There are also numerous examples of technology-based businesses which are now able to locate in regional areas thanks to the connectivity NBN provides.

“It supports more efficient ways of operating in a whole range of sectors – distance education, telehealth and the distribution of content like books, music and information.

“While much of the focus on NBN has been the residential sector, the difference the NBN is making to the business sector is a really important part of the productivity gains it can deliver.”

Speaking on threats to the investment, he said that the NBN business case assumes a take up rate of approximately 72-75 per cent, a number he says is on track.

He said that with the introduction of 5G capable technologies, which offer flexibility and value over wireless and mobile devices, fixed wire services such as the NBN remain competitive with better value price points.

“The NBN business plan already assumes 25 per cent of households won’t take up the service and that’s because they’ll be served by existing mobile services,” he said.

“5G offers huge flexibility and value because you can deliver very high bandwidth broadband over wireless and over mobile and so you can see all kinds of industrial applications where you might want to have high bandwidth connectivity on a robot going into a mine or elsewhere.

“Mobile operators will want to price 5G at a price premium for that, it won’t be their best business strategy to use it to deliver Netflix into residential customers.

“Despite 5G capacity it will remain the case that fixed networks can deliver more data at a given price point than mobile networks, that’s always been the case, that fundamental relationship hasn’t changed.

“While there will be a proportion of people who’ll use 5G in the home, undoubtedly in terms of the bulk of the market the NBN is serving it will have better economics than the 5G operators will have and they’ll be focusing their offerings on somewhat different services.

“The most important thing is to have competitive markets.

“We’re among a handful of nations that have been in the lead to install 5G networks and that is a good thing, competition is important.”