Net economy bigger than Ben Hur

Internet worth $AU50 billion to GDP, says Access Economics

The Internet isn’t just a curiousity or a medium for transmitting videos of cats and naughty bits: according to a Deloitte Access Economics report, its aggregate impact on the economy rivals that of Australia’s retail sector.

According to The Connected Continent, billed as the first attempt to quantify the scale of the Internet economy in Australia, when the Internet’s direct economic impacts are measured, it’s worth about 3.6 percent of GDP at around $AU50 billion annually, and employs 190,000 people.

The report also estimates (although this is, of course, subject to whether or not you happen to agree with the models and measurements used) that the Internet delivers $AU27 billion in productivity benefits annually, along with “convenience” benefits of around $AU53 billion to households each year.

Moreover, Deloitte Access Economics believes the direct contribution of the Internet to the Australian economy is set to grow at double the rate for the rest of the economy, at about 7 percent annually. If true, this rate of growth would make the Internet a market worth $AU70 billion employing a further 80,000 people.

Prepared for Google Australia, the study admits the difficulty of creating such estimates: “the paucity of available data measuring the different aspects of the Internet economy” means that the direct measures economists favour – the production of goods and services, expenditure on goods and services, and business and individual income derived from particular activities – aren’t readily available.

By assessing both employment in, and income from, businesses directly associated with the Internet (such as carriers, ISPs, consultants and so on), the report believes the total “value added” in the Internet economy is alone worth $AU22.3 billion a year.

As for benefits to households: these derive from individuals’ use of search, which the report assesses as being worth $AU7 billion a year; more variety in the goods and services available to people ($AU16 billion annually); convenience, in the form of the time saved dealing with banks, bills, or government ($AU8 billion a year); and recreational use of the Internet ($AU22 billion a year).

Comment: There is, of course, plenty of scope for criticism of the report – even its authors admit the likely flaws in both measurement and methodology.

Even if the absolute values Deloitte Access Economics has assigned to different aspects of the Internet economy have errors, if they’re even reasonably accurate, the report is a valuable contribution to a great many debates in Australia.

Critics of Australia’s National Broadband Network project, for example, are apt to dismiss the Internet as focused on entertainment (something I have been guilty of in years past). Because it’s private entertainment, it should not attract government support.

So the first contribution this report makes to the national debate is to highlight the genuine economic worth of the Internet – not only as an employer of people and seller of services, some of which are associated with entertainment, but also as an enabler of economic activity, efficiency, and productivity.

A second, less obvious contribution is that the report highlights just how poorly businesses in the Internet economy interact with government.

Although mining makes more money than the Internet – a gap that’s bound to narrow over time – employment in the two industries is similar: 190,000 in the “Internet economy”, around 175,000 in mining.

The two industry sectors are fairly comparable – yet one has clout (try taxing or even criticizing this country’s miners), the other has almost none.

Finally, there’s this: the report is independent of government –Access Economics, often referred to as Australia’s “Treasury in Exile”, is as frequently critical of government as it is supportive.

But if the report is even ballpark-accurate, then the household benefits it accrues in a single year are greater than the price tag put on the National Broadband Network. Over the lifetime of the project, it really should justify the spend – even ignoring the business benefits. ®

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