Companies need to invest more in technology

A new report from the Tech Council of Australia concluded that Australia’s large, medium and start-up companies need to increase spending on technology adoption to contribute to an economic boost to grow the overall level of technology investment and ensure to ensure that the land does not sink. behind the rest of the world.

The report, published in Novemberargues that Australia should adopt a national technology investment target. It suggests that increasing total technology investment from 3.7% to 4.6% of the country’s GDP by 2035 could contribute AUD$39 billion in productivity gains. The boost would require an increase in both technology adoption investments and technical research and development spending.

Researchers said boosting spending could boost economic productivity and keep Australia competitive with global markets.

Technology adoption is part of the path to productivity

The Tech Council reported that Australian companies are currently investing $90 billion in technology adoption – equivalent to 2.2% of GDP, or about $2,100 per capita. Although this figure has increased from $1,700 per capita in 2016-2017, its share of GDP has remained unchanged.

According to the report, investing in technology adoption means acquiring technology that is new to the company, but not necessarily to the industry, the country or the rest of the world. This distinguishes adoption expenditure from investments in R&D technology, where entirely new technology is developed.

The Tech Council calls for a GDP increase of at least 0.4% in technology adoption investments among large, medium and small companies, bringing the total to 2.6% of GDP by 2035. A 0.7% increase in R&D expenditure would bring technology investment expenditure to 4.6%. of GDP – well above the currently expected 3.5%.

Researchers found that if Australia increased total technology investment even further to 6.9% of GDP, it could achieve $167 billion in productivity gains by 2035.

“Australians enjoy one of the highest standards of living in the world,” said Tech Council CEO Damian Kassabgi in a press release. “To ensure that we can continue to grow, we need to see an increase in productivity growth.”

He added: “Australia’s productivity growth has been declining for some time, which is one of our most pressing economic challenges. To achieve the level of growth we need to reverse this and see our economy thrive, greater technology development and adoption is required.”

Australia lags behind in business technology adoption

The report notes that Australian companies lag behind the European Union when it comes to technology adoption.

Australia and the EU compare their respective technology adoption levels using a Digital Intensity Indexwhich measures factors such as digital skills, cybersecurity, digital business management, digital technology and infrastructure, and e-commerce and online presence.

Australian companies tend to cluster more around the bottom rungs of the rating system. Just over half of all Australian businesses have a ‘basic level’ of technology use, compared to 41% of businesses in the EU. Only 10% of Australian companies were classified as ‘established’ or ‘advanced’, compared to 25% of companies in the EU

This low figure comes despite the fact that technology adoption has practical benefits. Research from the Office of Innovation & Science Australia and AlphaBeta showed that the Australian Stock Exchange’s top 200 companies that actively invested in technology adoption and R&D between 2005 and 2016 were more likely to survive and grow than other companies on the index that prioritized paying dividends.

A study conducted by Ai Group in 2024 showed that Australian companies are tackling their technology adoption challenges. Eighty-four percent of companies surveyed were found to be actively adopting new technology, including 100% of large companies, 82% of mid-sized companies and 63% of small companies.

How much technology adoption is required in Australian companies?

The Tech Council is counting on more adoption investments from large, medium and small companies. Given the current levels of technology adoption reflected in the EU comparison, researchers estimate the following:

• Small businesses could contribute 0.19% of GDP to technology adoption investments by 2035, as more companies (12%) move from a ‘baseline’ status of digital intensity to a ‘developing’ category.
• If a greater number (17%) of medium-sized businesses were to move from ‘developing’ to ‘established’, helped by scaling up innovative small businesses to this size, they could add 0.16% to GDP.
• Another 0.05% of GDP could be earned by large companies if 7% of them moved from ‘established’ to ‘advanced’. This would classify 5% of local businesses as ‘advanced’.

Economy-wide training of managers could boost investment

The Tech Council has recommended that Australia explore opportunities to create technology industry-led executive education programs for all types of businesses in the economy. The education programs could focus on opportunities for companies to adopt technology and manage technology risks.

“Management skills appear to have a significant impact on productivity, in part due to the role managers play in facilitating innovation and harnessing the benefits of technologies,” the report said. Recent Gartner research found that CIOs are more successful when they elevate CXOs within companies.

Researchers also suggested that these programs should be designed as “vendor-independent executive education programs,” avoiding being associated with particular vested technology interests. This would encourage wider adoption of technology upskilling across the economy to support future investments.

“Technology investments enable companies to commercialize their research and create new business models, making our economy more productive and resilient,” Kassabgi said. “There are also practical benefits to greater technology adoption, which can accelerate the growth of both small and large businesses.”