17 May 2021
In this episode of the PwC Federal Budget Podcast, we look at why the Government’s Digital Economy Strategy is a step forward, what key industries will benefit from greater digitisation, and how to enable the next generation of digital talent.
Laura Jayes: Hello, I'm Laura. Welcome to the PwC Federal Budget podcast.
COVID-19 triggered the largest work from home transition the world has ever seen, coupled with the rise of online shopping, digital entertainment and telehealth, it's little wonder that the 2021 federal budget has continued the Government's investment into digital.
I caught up with PwC Australia’s Cyber Security and Digital Trust Partner Nicola Nicol and Telecom, Media and Technology (TMT) Partner Mohammed Chowdhury to discuss why the Government's Digital Economy Strategy is a step forward, what key industries will benefit from greater digitisation and how to enable the next generation of digital talent.
So can Australia achieve its ambition to be a top 10 digital economy by 2030? Let's find out.
Well, we should start at the very beginning. The Government has been talking about the digital economy, as you'd expect, it's put this goal forward of top 10 by 2030. Give us an idea of where we are compared to the rest of the world?
Nicola Nicol: If you look at Australia from a security point of view, we've invested heavily over the last 12 months and in the 2020 budget there was significant investment in cyber. This year there is really a continuation of that. It's about really building trust in the ecosystem. I'll give you an example; if you look at some of this simplification, but also security of citizen services. So things like building a better, consistent digital identity across Government services that's actually forecasted to unlock 11 billion dollars per annum in just servicing costs. So there's really that linkage and connection between implementing improved citizen services and making things simple and making them secure at the same time, really delivers economic value.
Laura Jayes: Corporate Australia is often ahead of Government when it comes to steps towards the digital economy. But with this target from the Government, how does it support what already is being done?
Mohammad Chowdhury: There is a lot being done by corporate Australia, especially large corporates and big end of town companies who are generally much more advanced with digitisation than medium or small size businesses. But the real opportunity, Laura, is in that SMB space, which is over 55 percent of our GDP, but at the moment are much less digitized and a lot of their peers in other OECD countries like Germany or South Korea, for example. So today in Australia, almost 75 percent of SMBs don't have a high speed broadband connection. So if you think about that, it really shows us what the opportunities for the digital economy going forward are for Australia to really grow and to target being in the sort of top 10 digitized countries within the next decade.
Laura Jayes: Mohammed, what can we learn from other countries who are better at this than we are at the moment?
Mohammad Chowdhury: The countries that have successfully digitised Laura are ones that have really had a champion that have been behind the digitisation. Digitisation happens in thousands of businesses around the country and affects millions of employees. So having a champion in those first few years is very key.
So if you look at examples of Singapore, they had a Minister of Digital Economy across the nation. If you look at Finland, they were absolutely determined in creating the right policy and regulatory environment for digitisation right from the centre of Government. And we could see the same sorts of things happening in countries such as the UK and the US.
So Australia probably needs to have a focusing mission around the digital economy, which probably needs to come partly from the Federal Government, but probably needs to come from states as well. The second thing I would then say is that mission needs to be followed through into the implementation of these programs.
Laura Jayes: Nicola COVID-19 has dictated so much of our lives over the last year. But what are the opportunities here? How can we dictate it?
Nicola Nicol: And so I think a real opportunity here is twofold. And one, it is to really embed security upfront and everything we're doing to digitise the economy. And if we look at, you know, 95 percent of Australian CEOs have said that cyber is a threat to business growth.
And I think we have an opportunity to get ahead of that risk and actually build solutions up front early from a digitisation agenda. So I think that's one significant opportunity and the other is to build capability and build skills and experience. And, you know, we've seen many individuals of different groups to women in particular impacted by the pandemic. And as we look to grow and uplift skills in the cyber space and even in the digital space, then we've got an opportunity to help people get into really well-paid careers and start to grow and impact an improving economy through that recruitment and that improvement of skills
Laura Jayes: In the Budget, there was $1.2 billion going towards this Digital Economic Strategy. It's a step forward. And I think we've just had a year where people have interacted with services such as MyGov, My Health Record, and the Digital Identification System who really wouldn't have done that pre pandemic. How will this Budget spend help customers have a better experience, Mohammed?
Mohammad Chowdhury: This Budget couldn't have come at a better time. So firstly, as you rightly said, Laura, the COVID-19 experience forced most of us into adopting digital technologies in our day to day lives and in our work. We basically went through a decade's worth of digitisation over a nine month period. And as a result of that, the country is now much better poised to pivot into digital in a bigger way than it was before COVID-19 hit us.
In terms of health care, it's probably a very obvious industry to start with. The money that's going to go into MyGov is about 200 million dollars and My Health Record is $300 billion - will actually go a long way to sort of continuing the advances made during COVID-19. And that'll impact many parts of our society in different ways.
So if, for example, you take aged care. Aged care is potentially one of the real beneficiaries from digitisation because today in many of our aged care facilities, elderly citizens are really confined to staying in the facility. Whereas with better digitisation and connected technologies that allow individuals to be monitored even when they're moving around or even for their medication to be adjusted, it means that a lot of our elderly citizens will actually be able to go out more often from the aged care facility, to spend time with their families, perhaps even visit home, and to do so with a dignity, knowing that they've got a level of care behind them thanks to digital technologies, which are able to exchange and utilise that data in a really efficient way. So this really comes at a good time, not just for health care, but for other industries
Laura Jayes: To Nicola, beyond health, where do you see the opportunities?
Nicola Nicol: What I was really pleased to see was there's this focus on uplifting the protection of sensitive data that were held by government and also some things like the pilot of cyber helps, which is all about how do we make sure that smaller government departments and agencies that perhaps don't have the skills and capabilities themselves to really protect services in a really mature way. They actually centralised some of that, so Mohammad talks about all of those impacts across industries and citizens. We actually really are also seeing here their focus on strengthening the Government services themselves and the Government's data protection.
Laura Jayes: We didn't see a huge investment in the Budget when it came to cybersecurity, apart from the expansion of the Cyber Security Innovation Fund. How important is that fund and is it going to make a meaningful impact?
Nicola Nicol: Yes, I think that continuation of spend is really the theme. So there was not a lot of new information in the Budget on cyber, but it's more about the continuation from last year. And the expansion of the fund, I think, is really key. There’s 40 percent of Australian businesses who are planning to increase their cyber headcount this year. And we've never witnessed such a high demand for cyber resources. So I think having that fund there and increasing the spend on that for this year is really important. What I'd like to see is just some expanded objectives around that. So let's make sure that that funding is really focused on the right things. Somebody's able to measure the impact of it. I think for me that's what's key. But it was great to really see that increased investment. I think that's going to be important for building our capability going forward.
Laura Jayes: Mohammad, you identified some areas where business can expand in the digitisation journey, if you like. It has been an establishment of the new national network of artificial intelligence centres. Is that a leap in the right direction or just a step?
Mohammad Chowdhury: That's a great question. I would say it is a very important step in the right direction because it's really important that Australia does develop onshore capabilities and skills in areas such as artificial intelligence. And that's because those technology capabilities need to be very accessible to our businesses. They need to also be onshore so that we have a level of resilience and our own capability in these areas, especially as trade patterns and political patterns around the world for trade, you know, influence change. And especially as Australian businesses seek to become much more participating in, say, the Asian and Pacific economy and broader.
Laura Jayes: Do we have the pipeline of skilled workers coming through?
Mohammad Chowdhury: We do have a strong capability to develop that pipeline. So if you look at some of our universities, we have world class research capabilities in various technologies across different industries. We need to do more probably to develop that pipeline of graduates and skilled technicians who are coming through. But we also probably need to develop our capabilities not just in technical skills, but actually in human skills and collaboration skills in order to utilise the benefits of digital technology.
Nicola Nicol: And Mohammad, I could not agree more if you even think about that through the security lens. So we've actually seen a change in the requirements for hiring and what employers are hiring for cyber skills. And what's become really important are things like communication skills, problem solving, social skills. So that breadth of what employers are looking for, I think both in the broader digital economy, but also in the cyber security space.
Mohammad Chowdhury: I very much agree with you and building on that I think that there’s sort of two points that come to mind. One is that we must think of the digital economy as an inclusive economy. So you've already talked about diversity and inclusion. And I would sort of add to that by saying that there's also a regional element to this in Australia.
So Australia is very much dominated by the CBDs in our state capitals. However, a significant amount of our population and perhaps increasingly so, will be living in regions. And to some extent, there is a real focus now, I think especially from State Governments should help very much by some of the federal funding to really make sure that all digitisation is inclusive geographically to different communities in rural and regional areas.
That's very much important from a) connectivity perspective, so that we get the right fibre and mobile connectivity that mean that different communities can participate in this digital economy. But I think also from a skills development perspective, it's very important.That we are very inclusive in our communities getting on to this digital. And not having the threat, if you like, or the risk of a digital divide going forward.
Laura Jayes: You both talked about the need to attract talent to the industry. If I could bring it back to the budget, there's a 100 million dollar line item there for development of digital skills in the workforce, and this is including cadetships as well. Nicola, are we good at this as a Government? Is this enough?
Nicola Nicol: So I think we're getting better. We are investing more every year. And in looking at how we increase our digital skills, we're looking at more partnerships. If I look at it, you know, not one of us can solve this problem. It's not the Government's problem to solve. It's not the industry's problem. It’s got to be Australia’s challenge.
And actually, I think it represents a huge opportunity for not just for up and coming students who are coming into the workforce, but also for those who want to change and get into it, learn new skills and move industries and get into other well-paid jobs.
So I think we've got to think broadly about what we're doing. I think it's about partnership between the Government and private sector. And I think we're improving every year. I think with recognising the investment and what I'd like to see us measuring is outcomes. And I think what's really important is being able to track that and understand are we making enough inroads as we go forward.
Laura Jayes: So what has Australia got to gain from increasing focus on digital progression and what are the key ingredients?
Mohammad Chowdhury: What's at stake here Laura to your question is a lot. So, I mean, according to some of PwC’s analysis, the economy stands to gain something like two percent revenue growth or output growth through digitisation. And if you add that up across the economy over the next decade, according to our analysis, we could be looking at a 230 billion dollar uplift in GDP over the course of the next 10 years, which is very significant if you think about that.
So really, this needs three levels of activity off the back of the Federal Budget. Number one, I think it means that the Federal Government and indeed the state governments must coordinate really closely when it comes to the digital economy. The second one, I would say, would be implementation. So we've seen a fantastic line of initiatives coming through the Federal Budget. I think the detail now about how these initiatives are implemented will actually tell us a lot about how successful we can be over the next few years.
And the third one, I would say, if I may, would be partnership. And I think this is about partnership between industry, Government and also some of the communications companies, which are really key to providing the underpinnings for our digitised economy. And that partnership is something probably new to us in terms of the extent of partnership it's going to be required over the next few years.
Laura Jayes: Indeed, you've both said that it's not up to the Government in this space alone, but is there something else, Nicola, Government can do besides those three points that Muhammad made?
Nicola Nicol: So for me, there were two things that struck me. One, that we've talked about to digitise the economy you've got to make sure you do that in a secure and safe manner. So what I would like to see is the Government making sure we're building in security up front. So when you look at the Digital Economy Strategy, security, yes, is a key pillar in that but I think it could better talk to making sure that we're building in security along the way, because I think that's a foundational piece that must happen in order to protect this digital economy as we move forward.
The second point in my mind is about measurement. I think we've as we move so fast. Right. And the digital economy and the pace of change is significant and probably something that we are continuing to get used to. If you look at that pace of change, we need to make sure security keeps up with that pace of change and we’re spending and improving security in the right areas.
Laura Jayes: Let's finish on that 2030 target. The Government wants to be a top 10 digital economy. Is it achievable and is it ambitious enough?
Mohammad Chowdhury: It's absolutely achievable. We are an OECD nation. We are the world's 14th biggest economy. There's no reason why we shouldn’t be in the world’s top 10 digitised economies. There's a lot of hard work to be done, which requires all of coordination, implementation and partnership. So it'll be very much in our hands to be able to achieve that target collectively. And if we're able to really gather around this, I think we can do it.
Laura Jayes: Nicola, Mohammad, thank you.
Mohammad Chowdhury: Thank you very much.
Nicola Nicol: Thank you. Laura.
Laura Jayes: Thank you for listening to the 2021 PwC Federal Budget podcast, we hope you enjoyed our commentary. For additional in-depth analysis, head https://www.pwc.com.au/federal-budget.html, where you find articles and information about the 2021 federal budget and what it means for the economy, our society and you.
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Partner, Melbourne, PwC Australia
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Partner, PwC Australia
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