Internet set to contribute $70bn to Australian economy by 2016: Report

Australian businesses are set to gain a $27 billion boost to productivity in 2011 as more companies shift to eCommerce, new figures reveal, with the web tipped to contribute $70 billion to the economy by 2016.

A Deloitte Access Economics report, commissioned by Google, estimates the internet contributed $50 billion to Australia’s gross domestic product in 2010.

This figure equates to a 3.6% share of GDP, putting it on par with the economic value of iron ore exports and the annual proceeds of the retail sector.

This year, the report predicts local businesses will gain a $27 billion boost to productivity as more companies shift their sales processes online.

According to Deloitte Access Economics director Ric Simes, this shift is “potentially a major driver of economic prosperity”.

“It is early days in a wave of activity that has the potential to provide productivity boosts akin to the micro-economic reform agendas in ICT of the 1990s,” he says.

The report found growth in internet activity had doubled over the past four years, driven by factors such as infrastructure investment, the uptake of new technologies such as smartphones, and social media.

Nick Leeder, managing director of Google Australia, says the internet is unlike industries such as iron ore mining, where the direct economic benefit is tangible and easy to calculate.

“The internet is having a profound effect on how the economy and society works in many ways that we don’t fully yet understand,” Leeder says.

“For small businesses, households and [other] businesses, the positives from the internet are distributed throughout the economy,” he says.

“The internet is not great news for people who rely on what have historically been barriers because it flattens things out and allows smaller businesses to compete… with big businesses.”

The shift online has given small businesses an opportunity to compete with retail giants through targeted and hyper-local sales initiatives.

According to the study, the share of businesses with an online presence has grown steadily over the past decade. In 1998, 12% of businesses surveyed by Sensis had a website and just 5% sold online.

Sensis data now suggests 60% of businesses have a website and the vast majority of those sell goods and services online.

The report estimates there are 190,000 Australians employed in jobs directly related to the internet such as software firms, internet service providers, and eCommerce and advertising.

The report also reveals the finance and real estate industries have the highest average proportion of internet use in sales.

According to Simes, the internet’s contribution to the national economy will continue to grow by around 7% a year to reach $70 billion by 2016.

The report says the rollout of Labor’s $36 billion National Broadband Network will further entrench the internet’s position as a major contributor to the Australian economy.

Leeder agrees the rise of the internet in Australia’s economy depends on faster and more widespread access to broadband.

“Without the NBN or something a lot like it, we’ll be running the risk of constraining one of the key drivers of economic growth,” he says.

Peter Strong, executive director of the Council of Small Business of Australia, said earlier this week the internet could pose problems for small businesses, namely the issue of internet access.

“We’re worried that at some time small businesses might be squeezed out from the internet. It’s similar to small business being unable to get into shopping centres,” he said.