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This Statement has explored in both the United States (US) and Australia the recent experience of, and the potential for, a sustained period of accelerated productivity growth from exploiting innovation in ICTs through maintaining a good macroeconomic climate for investment, competitive and flexible markets, and open, outward looking trade and investment policies.
The experience of the US and Australia with ICTs, and broader global experience with earlier waves of general purpose technologies, shows that technological advance is not a deus ex machina. It does not automatically deliver its benefits as a windfall to the leading producers of the goods or services embodying the new technology.
Inappropriate policies and structural rigidities can hobble powerful new technologies. To give a distant example, by 1400 China had already invented moveable-type printing, the blast furnace and the water-powered spinning machine. If China had then had the right system of property rights and public policies to support the financing, efficient allocation and management of investments in the new technologies, the first industrial revolution could conceivably have occurred in China, 350 years earlier than its actual birth in the UK. Instead, it took until the 18th century for the UK to provide the first conjunction of powerful, general purpose technologies with the social attitudes, policies and institutions that allowed the confidence to invest, the ability to profit, and the `gales of creative destruction' necessary to displace earlier technologies and change work practices.
Through history, the rewards of major new technologies have repeatedly gone to productive users of new technologies, not to the early producers of them. Productive deployment of new technologies requires large investments and extensive structural changes, both of which depend on a supportive policy framework and in particular, open flexible product and labour markets.
With general purpose technologies such as ICTs, and their potential to raise productivity throughout the economy, the early international winners will be those who can harness the technology through competition in a good investment climate to finance the most competitive, productivity-enhancing uses of the new technologies. If Australia can sustain a supportive macroeconomic environment and vibrantly competitive markets while creating more flexible labour markets, it will be well placed for a second wave of sustained high productivity growth and consequently broader social opportunities.