IT Sector in Australia

A Feasibility Report
Amrita Pandey
2/7/2013

Table of Contents

1. An overview of macroeconomic fundamentals in Australia...............................................................Page 3 2. Market analysis: Information Technology industry..................................................................Page 4 3. Opportunities for investment in IT.....................Page 6 4. Conclusion.............................................................Page 7

Australia
Macroeconomic fundamentals according to International Data Comparisons (IDC):

In its latest World Economic Outlook, the International Monetary Funds (IMF) confirms that Australias economic fundamentals are strong with the real GDP growth projected to outperform every major advanced economy in 2012 and 2013. The Australian economy will likely grow by 3.0 per cent in 2012 and 3.5 per cent in 2013. These rates are broadly in line with Australian Treasurys projections. Looking forward, Australias economy is estimated to grow by an average annual rate of 3.4 per cent between 2012 and 2017. This rate will well exceed that of the USA, Canada, the UK, and is more than double that of Japan, France, Germany and Italy. Australias headline Consumer Price Index (CPI) increased by 0.1 per cent in the March quarter following no change in the December 2011 quarter. CPI rose 1.6 per cent through the year to the March 2012 quarter, compared with a rise of 3.1 per cent through the year to the December 2011 quarter. The trimmed mean for the March quarter, year-on-year, stands at 2.2 per cent, within the Reserve Bank of Australias (RBA) target band of 2 to 3 per cent. Australias unemployment rate has edged up by 0.1 points to 5.1 per cent from April to May. Year-on-year, the unemployment rate has risen 0.2 points. The ABS stated that full-time employment increased by 46,100 (0.6 per cent) in May while part-time employment decreased by 7,200 (0.2 per cent). The Australian unemployment rate remains low compared to other advanced economies including Canada (7.3 per cent), the UK (8.2 per cent), the US (8.2 per cent), France (9.6 per cent), and Italy (9.8 per cent). Australias two-way trade with China in 2011 was A$121 billion. China was Australias largest two-way trading partner, as well as Australias largest export market (A$77 billion) and source of imports (A$44 billion). Japan remains Australias second largest trading partner with a total two-way trade value of A$73. The US remains a significant trading partner with a two-way value of A$54 billion.

At the June 2012 meeting, the RBA Board decided to lower the cash rate by 25 basis points to 3.50 per cent, effective June 6. The latest move followed the 50 basic point interest cut on 2 May 2012. The RBA noted in that recent domestic data generally had not suggested a significant weakening in conditions compared with the forecasts a month earlier. The Central Bank also indicated that there was clear evidence suggesting a softening in global conditions, and uncertainty about the future in Europe had increased significantly. IMF latest statistics show the low levels of General Government Net Debt as a percentage of GDP in Australia compared to other economies. Net debt is a commonly quoted measure of a governments financial strength. The IMF forecast for 2012 in Australia is 9.5 per cent of GDP while the forecast for Japan is 135.2 per cent, Italy 102.3 per cent, the UK 84.2 per cent, the US 83.7 per cent, and France 83.2 per cent. On 12 June 2012, Moodys confirmed that the outlook for Australias Aaa foreign and local currency ratings remains stable. The credit agency stated that Australias economic strength is very high, based on the countrys economic diversity, economic performance during the past two decades, relatively good growth outlook and high income per capita. Moodys assesses Australias institutional strength as very high, a classification shared by all Aaa-rated countries and reflecting overall governance, rule of law, effective monetary and regulatory institutions, and transparency. Moodys notes that even at its peak, Commonwealth government and general government debt remains low by global standards, and the 2012-2013 budget forecasts a renewed downward trend in debt. As a result, the Commonwealth will continue to have one of the strongest financial positions among Aaa-rated governments. The report also notes that Australia has very low susceptibility to event risk.

Market analysis: Information Technology industry

A dynamic and rapidly growing market Australias highly skilled workforce and sophisticated R&D infrastructure has enabled it to develop a globally competitive IT industry. In the five years to 2010, the industrys annual growth rate surpassed that of the US, UK, Singapore, South Korea and Taiwan (Source: WITSA. Based on research by HIS Global Insight. Digital Planet, October 2011). By 2013, Australias total spend in IT is projected to be US$66 billion, with a compound annual growth rate of eight per cent over the period 2003-17 (Source: Austrade Benchmark Report 2011).

Uniquely positioned Many international companies see Australia as an ideal location to develop and test new products and services. They benefit from Australias robust intellectual property regime and technology-savvy customers and use Australia as a base for product and application development, content development, technical assistance and global sourcing facilities. These multinational companies include Canon, Citrix, Unisys and SAP, which all have R&D facilities in Australia. Cisco Systems, Sophos and CSC also run advanced technical assistance centres from Australia for operations around the world. Highly developed R&D infrastructure Australia has a sophisticated network of IT R&D facilities, run primarily through the private sector and supported by the government and universities The Australian government has committed to establishing a world class National Broadband Network that will deliver broadband speeds of up to 100 mbps to over 90 per cent of premises, encouraging research into new applications and services. Work on the National Broadband Network has begun and the fixed wireless rollout, which uses the latest 4G technology, is expected to be complete by 2015. Skilled and experienced IT workforce With a skilled and experienced IT workforce of over 300,000 professionals, Australia is ranked highly for the availability of IT skills, qualified engineers, and research and development personnel, as well as for the extensive domain-level knowledge and quality technical expertise on offer. Significant contributions in the field Australia is globally renowned for its capabilities in many areas of IT including telecommunications, IT services, and digital content, while the countrys highly regarded research community has contributed to many significant scientific discoveries and commercial developments, including:

The 802.11 technology behind Wi-Fi Gi-Fi Giga-bit wireless (known as radar on a chip) Open Kernel Labs software embedded in over a billion phones worldwide EFTPOS (Electronic Funds Transfer Point of Sale) The Ultrasound Scanner, and Google Maps.

Australias digital content industry is of particular note. It encompasses high value digital products and services which are being developed not only in the IT sector, but across films, games, broadband, mobile, and broadcasting. The impact of the digital content industry extends across the economy and will be one of the major drivers of economic competitiveness in the coming decade. Australia is a mature and technologically sophisticated market with high internet, PC and smart mobile device penetration rates. Australia is also ideally positioned for the future with the growth of cloud computing: in February 2012, the Business Software Alliance (BSA) ranked Australia second in the world in preparedness for cloud computing.

Opportunities for investment in IT

Australia provides a number of strategic IT investment opportunities, including in the A$27 billion software industry and applications development from e-health and e-learning to digital content and entertainment; in financial services the countrys largest vertical market for IT spending; in datacentres, systems integration and managed services; and in sustainable IT such as smart grids, renewable energy management systems, and supply chain/logistics optimisation.

Australia ideally positioned to capitalise on cloud computing revolution

Business Software Alliance (BSA) has ranked Australia second in a study of global preparedness for cloud computing. The report, BSA Global Cloud Computing Scorecard, measures the readiness of countries to support the growth of cloud computing, which marks the next contribution that software and computing technologies will make toward greater productivity and expanded economic growth. The scorecard ranks 24 economies, which account for 80 per cent of the global IT market, according to seven policy categories: Data Privacy, Security, Cybercrime, Intellectual Property Rights, International Harmonisation of Rules, Promoting Free Trade and IT Readiness, Broadband Deployment. With a collective score of 79.2, Australia ranked second in the world behind Japan. The study placed Australia ahead of Germany, the US, France, Italy, the UK, South Korea, Spain, Singapore, Poland and Canada. Those countries deemed least prepared to support cloud computing include the emerging economies of China, India, Thailand, Vietnam and Brazil. Australia ranked highly in all categories, but was particularly well positioned (ranked first) in critical areas of intellectual property rights, and support for industry-led standards and harmonisation of rules.

 The BSA Report stressed that intellectual property laws must provide strong incentives for cloud R&D and infrastructure investment, and should ensure clear protection and vigorous enforcement against misappropriation and infringement. In this measure, Australia, along with South Korea, ranked top among the 24 economies. On standards and harmonisation, the BSA highlighted consumer demand for interoperability in the cloud computing space and the importance of government support for standards development organisations and other international avenues to meet this demand. Australia scored 10 out of 10 in this area. According to the report Cloud computing can achieve its potential only if there is robust, ubiquitous and affordable broadband access. The report highlights several countries that have implemented impressive national broadband networks, including Singapore (average score of 21.8 out of 30), the US (21.7), South Korea (21.7) and UK (21.5). Australia ranked fifth in this category with an average score of 21.3 reflecting the massive infrastructure improvements under way in the country.

Conclusion
Consequently, businesses can expect a stable and efficient regulatory environment, a highly skilled and multi-lingual workforce and a culture of innovation. An unparalleled economic record, world-class industry capabilities and unique cultural and geographic advantages in the worlds fastest growing region all form part of Australia's impressive reputation as an investment destination.

Sources:
BSA Global Cloud Computing Scorecard* Australian Trade Commission*