AFA CEO, Patrizia Torelli, has been monitoring the “Tech Investment” conversation for some time and wants to bring this conversation to the attention of AFA our partners and members. The Australian Financial Review reports on this phenomenon, and the AFA urges its members to read it. If you have any comments, please feel free to drop us an email at care@theafa.asn.au. Let’s keep the conversation going.
Treasurer Jim Chalmers’ hopes of reversing a long-term forecast slump in Australia’s economic growth could be undermined by companies falling behind global peers in critical technology investment.
Spending on machinery and equipment as a portion of the economy fell from between 7 per cent to 8 per cent in the early 2000s to just over 4 per cent last year, according to the Australian Bureau of Statistics.
Exacerbating the situation, the contribution of IT equipment to capital input fell sharply over the same period, which KPMG Australia chief economist Brendan Rynne warned would undermine long-term growth.
“What we’re seeing is a disproportionate amount of investment going towards building and structures as opposed to plant and equipment and, particularly, IT equipment,” Dr Rynne said.
History suggests the greater the investment in high-tech capital, the more likely the sector is to achieve productivity gains and real wage growth.
“What has become apparent was that America invested much more heavily in high technology capital than Australia did both in absolute and relative terms,” Dr Rynne said.
“Arguably, we can see that higher investment in technology is now paying greater productivity dividends for the United States while Australia more recently has been struggling to achieve real productivity growth.”
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Courtesy of The Australian Finacial Review