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CSIRO $400 million funding unlikely to increase Australian productivity as claimed

The federal government and the CSIRO announced this weekend a new $400 million ($40 million a year for 10 years) research project to boost Australia’s digital economy by an estimated $4 billion-a-year in productivity gains by 2025. These gains are based on the assumption that the country will be fully connected through the National Broadband Network (NBN) by this time as well.

The launch of CSIRO’s Digital Productivity and Services Flagship (DPAS) today was attended by Sir Tim Berners-Lee, presumably there to lend some credibility to the venture. Being an election year the Government will be keen to ensure that any spending receives popular support and reinforces an image that there really is a plan for what Australia will do once the mining boom is over.

Although research funding of any kind is to be welcomed, it is somewhat hard to believe the claims being made for the eventual impact of this funding. Specifically, how CSIRO will have any impact on Australia’s overall productivity, especially within the stated time frames, over-and-above the benefits that will accrue through the general adoption of high speed broadband.

The CSIRO promotional video for DPAS starts with the premise that Australia’s overall productivity has been falling and that this research programme will be the thing that provides the keys to reversing that trend.


It is unclear what evidence is being used for the claims that our declining productivity has anything to do with digital inefficiency or that increasing it (assuming this is possible) will actually make a difference to Australia’s overall productivity as measured by the OECD and others. In fact, a federal government Productivity Commission paper on Australia’s productivity and the likelihood of Australia being able to match the US, warns of the dangers of making comparisons about productivity at anything other than the industry level. The paper specifically warns against making aggregate productivity levels a target measure and states: “the aggregate level of US productivity should not be regarded as a realistic target for Australia to achieve”.

More importantly however, are all of the labour market regulations and practices that have an impact on work productivity. Even here, it is hard to assess what the drivers are. Crikey journalist Bernard Keane has made the observation that the Howard Government’s WorkChoices introduction coincides with Australia’s largest fall in productivity between 2005-2008. He goes on to quote Judith Sloan who says: “fiddling around with periods of different labour market regulations and trying to line them up with macro figures on productivity, particularly changes in labour productivity within incomplete cycles, is a futile and unconvincing exercise.”

The DPAS video goes on to explain how rising health costs are going to be unsustainable in the future and that something needs to be done. Nobody would argue with this. We have an expensively ageing population and an increasing burden of costly chronic disease. Unfortunately, no manner of broadband or eHealth is going to help much in this regard. Efficiencies brought about by the introduction and use of eHealth have been notoriously difficult to demonstrate. This is not to say that eHealth isn’t an improvement from a work practice perspective, just that it doesn’t lead to cheaper or more productive health services.

The most effective way of containing costs of chronic disease is to reduce the incidence within the population, i.e. convince people to eat less and exercise more.

One can understand why CSIRO and the government needs to justify the planned expenditure of $400 million over the next 10 years. It is a pity that it comes at a time when the government has decided not to increase funding to Australian universities. Tertiary Education Minister Chris Evans has said that universities need to increase productivity like any other sector of the economy. One wonders why, if the Senator thought this was possible, we needed to spend $400 million on the CSIRO to show us how this is done?

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