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Business investment in new technologies: improving business performance


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17 January 2012: The latest Australian Industry Group/Deloitte National CEO report, Business Investment in New Technologies, examines business investment in new technologies over the past three years.

The report, based on a new survey of 540 business CEOs in the manufacturing, services and construction sectors, found business investment in new technologies is contributing to improved business performance through to higher productivity, ongoing product innovation, improved energy efficiency and better workplace safety.

Importantly, the investment in new technologies in these sectors - estimated at $25 billion per year over the past three years - comes at a time when non-mining businesses, particularly those in trade-exposed sectors, are facing intense competitive challenges due largely to the strength of the Australian dollar.

The survey also tested business expectations about the changed Research and Development Tax Incentive finding 40% of the businesses that developed new technologies in-house over the last three years did so without the assistance of the R&D tax concession. More than a quarter of businesses that did use the concession in this period were concerned that the recent changes to the R&D Tax Incentive would be negative for their business, with a similar number expecting them to be positive. Many others were uncertain about its impacts.

The report also explores how well prepared businesses are to take full advantage of the emerging opportunities from a national broadband network. While businesses are preparing to train their workforce and recruit new staff as the network expands, only 30% report having a high or medium degree of information about the practical impacts of faster broadband speeds. Just over 50% are adequately prepared to take advantage of the opportunities that may arise.

Other key findings include:

  • Close to 80% of respondents invested in new technologies over the past three years
  • Around 16% of the productivity gains achieved by these businesses were attributed to investment in new technologies. 71% of these businesses invested in order to improve productivity
  • Improving workplace safety was also rated as a major motivation for investment in new technologies - particularly among construction companies and manufacturers
  • Computer hardware and software along with machinery and equipment - particularly automation and control equipment - were the most common areas for investment
  • The report found that businesses had a polarized view about the new R&D Tax Incentive program. With 27% of businesses that used R&D concessions over the past three years expecting the recent changes to the program to have a negative impact on their business; while 22% were uncertain and 25% expected the changes would have a positive impact on their business.

The report makes a number of constructive suggestions for policy changes to build on the existing momentum in investment in new technologies and remove barriers to, and facilitate investment by, a broader range of businesses.

This report highlights a number of areas for policy action to stimulate investment in new technologies.

  • Improving the competiveness of tax arrangements by lowering the company tax rate or through more targeted measures is a practical way for the Federal Government to stimulate business investment in new technologies
  • Better industry-driven mechanisms for collaboration between publicly funded research organisations and business should be given a high priority, including in the Prime Minister's Taskforce on Manufacturing
  • There is strong scope for governments to improve the dissemination of information about new technology so as to obtain maximum impact to the economy
  • The new R&D Tax Incentive needs to be closely monitored and the Federal Government should be ready to respond to any shortcomings that become apparent
  • This report confirms the need for the Federal Government to boost understanding by small-to-medium businesses in particular of the opportunities provided by a national broadband network.

Australian Industry Group (Ai Group) Chief Executive, Heather Ridout, said, "With the adoption of new technologies being an important contributor to business-level productivity improvements, the report shows that businesses in the manufacturing, services and construction sectors have been active investors in a broad cross-section of new technologies over the past three years. Investment in new technologies accounted for an average of 21% of respondents’ total investment over this period."

Deloitte National Technology, Media and Telecommunications leader Damien Tampling said: "Better managing the explosion of data being delivered through the internet and social media channels was a key reason given by the respondents for investment in new technologies. With our capacity to tag and measure anywhere, anytime and across multiple channels, ensuring there is adequate technology, digital media knowledge, and expertise at the most senior levels of business, is critical. By combining data insights, businesses can better understand who their customers are and how they behave, in order to deliver the right products and services.

"In addition with investment in new technologies delivering greater productivity, much of it through the internet, grasping the potential of this change agent, including the opportunities, services and applications of the National Broadband Network, will help drive further productivity. It will also expand customer bases and enable jobs growth to meet the forecast of an additional 80,000 Australians to be employed in areas directly related to the internet over the next five years," Mr Tampling said.

The full survey can be found at Ai Group reports.

Background: A total of 540 CEOs in the manufacturing, services and construction sectors participated in the survey, which was conducted in October 2011. Combined, these companies had a turnover of around $27 billion and employed over 60,000 employees.

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Contacts

Name:
Louise Denver
Company:
Deloitte
Job Title:
Director, Corporate Affairs & Communications
Phone:
Tel: + 61 2 9322 7615, +61 4 1488 9857
Email
ldenver@deloitte.com.au

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