So is Australia a knowledge economy? How does the growing global importance of knowledge affect our trade balance? And how is Austrade helping ‘knowledge’ exporters?
There has been a lot of talk about the ‘knowledge economy’ lately. It comes in certain guises. We hear about it in innovation, education, and the IT sector. We’re told that overseas investors perceive Australia to be a ‘knowledge economy’.
What makes Australia a knowledge economy and where’s the evidence that we indeed are?
In a recent speech to the World Economic Forum, Reserve Bank Governor Ian MacFarlane pointed out that Australia is in a relatively high position in terms of various knowledge economy indicators. Australia came sixth in a table of internet usage as a per cent of population (after the USA, Canada and the Scandinavian economies) and second in a table measuring the number of e-commerce servers (after the USA).
Similarly, a report from the OECD found Australia to be a high performer amongst advanced economies in terms of use of internet technology, innovation, knowledge-transfer and investment in human capital. Australia’s ability to quickly implement new technologies was part of the reason for our strong multifactor productivity performance in the latter half of the 1990s. Australia achieved this without the assistance of a large ICT manufacturing sectors that is integral to a big economy like the USA or Japan.
Finally, in a report released by The Economist, Australia was ranked second in the world in terms of ‘e-readiness’. The methodology included several important knowledge economy components including, social, cultural, legal and regulatory infrastructure, connectivity and a business environment that is conducive to e-commerce services. Although the USA topped the table, Australia out-paced the UK, Canada, the Nordic countries, Singapore and the Netherlands in the e-readiness stakes. The rankings prove that a small consumer market is no barrier to Australia being strong in e-commerce.
But how is the emergence of the knowledge economy affecting trade? Most recent research shows Australia is highly competitive in knowledge services. We have done reasonably well in education, finance, and business and professional services. We will be helped along by the bilateral trade agreements, such as the one signed recently between Australia and Singapore.
However, in terms of knowledge goods, some say Australia’s traditional position as a commodity exporter means we won’t become a knowledge exporter. But this is not so. Many so-called ‘old economy’ exporters are using new economy technologies to increase their competitiveness and expand their export markets. Take the case of Queensland company Beeline Technologies, formed by Michael and Robert Mailler. Answering his father’s request for a tractor that ‘could drive in a straight line’, Robert put his engineering skills to work.
The Mailler’s got together with their next-door neighbours and developed a GPS-based automatic guidance system, which uses satellites to guide tractors in a straight line with an accuracy of 2 cm. This means less wasted time, fuel and cropping products, as tractor runs no longer overlap or underlap one another.
The Maillers became a knowledge exporter in 1998 when they sold their first Beeline Navigator. Beeline now employs 65 people in Australia, plus 20 in the US. The company achieved export sales worth more than $3 million in its first year. Their Australian base is in Brisbane.
Beeline Technologies aren’t the only examples of knowledge-based exporters that are emerging in Australia. Austrade research shows that there has been strong growth in the number of knowledge-based exporters – particularly amongst firms in areas such as education, professional services and medium to high technology-based manufacturing. Knowledge based services grew at just over 12 per cent per annum during the second half of the 1990s.
This has changed the way in which Austrade works. For instance, we have had to assess our geographical spread of resources within the Austrade network due to the growing demand for Austrade assistance in knowledge economy gateways such as San Francisco and London. Work intensification has increased in those posts, as has the type of assistance required.
Knowledge exporters, such as professional service firms, are often highly sophisticated and expect highly tailored, strategic advice from Austrade. This was one of the main reasons for the establishment of the Austrade Institute, an online learning environment for Austrade staff, and the increase in resources towards biotechnology, ICT and service industries. In the past, Austrade could often add significant value by simple finding information. Nowadays a lot of information is easily available on the internet. It is therefore Austrade’s combination of research skills, in-market networks and the ability to synthesize this to help companies review their market entry options that is most valuable.
In the knowledge-based international business environment, Austrade has to deal with more than just traditional exporting. It has to deal with market entry strategies and understand joint ventures and strategic alliances, as opposed to traditional agent/distributor relationships. There is also greater emphasis on protecting intellectual property whilst encouraging innovation and skills development.
So how is Australia faring in the knowledge economy? Some good signs are there. Certainly, there are particular characteristics of the Australian economy, such as a highly skilled culturally diverse workforce, a stable financial system and a well-established system of law and corporate governance, that will enhance our prospects in a knowledge based global environment. Our ability to adapt quickly to the next round of changes in the international business environment will determine our future success as a knowledge exporter in the global economy.
