The silver lining: cloud computing and small and medium enterprises

This paper shows how Australian businesses can get the most out of one of the biggest global innovations: information communications technology. Overview: Innovation – the successful application of new ideas – drives Australia’s productivity. Australia’s biggest innovation opportunity lies in creatively exploiting global innovations. One of the biggest of these is information and communications technology. Small and medium enterprises (SMEs) are an engine of the Australian economy. They employ two-thirds of Australian private sector workers and contribute half of Australia’s private sector GDP. Yet many SMEs have low productivity. Innovations may spread slowly to many smaller firms because they lack the capital or market intelligence that large firms can access. Online innovations – including mobile devices, e-commerce, and cloud computing – offer opportunities for firms of all sizes to become far more productive. This paper explores issues raised at a workshop run by Grattan Institute and Google on how policymakers and business can accelerate the spread of cloud computing among SMEs. It uses cloud computing – the delivery of on-demand information technology services over the Internet – as a case study for how online technologies can benefit smaller firms. Cloud computing can help level the playing field for smaller firms. It allows them to access sophisticated IT services that were previously out of reach. For example, it can allow them to manage and monitor their sales, operations and finances in real time. The cloud also offers capabilities that were previously unavailable to firms of any scale. For example, it allows multiple users to access applications or update documents at the same time from mobile devices. Cloud computing makes it easier for small firms to take new ideas to market. Firms that use cloud computing report more growth in revenue and profit than others do. But many Australian SMEs say they do not use cloud services. Many are not aware of the benefits or believe they do not have skills to capture them. Some are concerned about transition costs, data security and privacy. Networks are too slow or unreliable for cloud services in some areas of the country. Workshop participants agreed that government and industry can remove obstacles to the use of cloud computing and help SMEs capture its benefits. The industry itself should lead the education of SMEs on the case for cloud computing. Yet government can:  Choose policy settings that promote broader productivity growth and innovation;  Ensure interaction with government over the internet is the default for all businesses;  Provide an appropriate policy environment for investment in broadband networks that meet the needs of small business. Information technology’s contribution to productivity is just getting started. Small and medium enterprises should get on board

Super sting: how to stop Australians paying too much for superannuation

Australians are paying up to three times more than they should for superannuation, argues this report. Overview Australians pay far too much for superannuation. They pay about $20 billion in fees and expenses in total. Fund customers pay$1300 on average, every year. These payments to the superannuation industry can and should be reduced by at least half, saving Australians at least $10 billion a year. It is the largest single opportunity for micro-economic reform in the economy. High fees hurt account holders. They reduce the amount of superannuation at retirement by more than 20 per cent. High fees mean that on conservative assumptions a 50-year old Australian will have his or her super balance reduced by over$80,000 in fees (in today’s dollars) at retirement. A 30-year old will lose more than $250,000, or over a quarter of the total balance. Under a fairer fee structure, at least half that money could be saved. High fees also hurt taxpayers, who pay more for pensions when superannuation runs short. High fees are not justified by high returns: Australian funds that charge the highest fees consistently deliver lower returns than others once their fees are taken out. Other countries show that superannuation can be managed at much lower cost. Australian funds charge fees that are three times the median OECD rate, on average. Many countries have superannuation pools much smaller than Australia’s, yet their funds charge customers much less. Costs are too high in Australia because the system assumes that account holders will make choices that will generate pressure for lower fees. Yet this approach has not worked for decades, nor has it worked overseas. Superannuation is inherently opaque, and few people can make or care to make an informed choice. Some argue that the complexity of Australia’s superannuation regulations increases the cost of the system. If this is true, it exposes an urgent need to reduce regulation. Yet the wide variation in the fees charged by funds suggests that superannuation businesses are choosing to charge higher fees. Recent reforms will not help much. MySuper — a more uniform set of products for people who do not actively choose their funds — makes funds somewhat easier to compare, but does little to increase the pressure on fees. SuperStream, a package of administrative reforms, will reduce some costs, but does nothing to address the costs of marketing, sales or asset management. Overseas, the best superannuation systems establish tenders for the right to run the best-priced default fund — one that most employees, who don’t manage their own accounts, automatically pay into. The Australian system should follow suit. Government should select a small number of default funds every few years with a tender based on fees. Unless they opt out, all new job starters would pay into these funds. Second, to push down fees for existing accounts, tax time — from the end of June — should also be superannuation choice time. A new step in the tax return process should enable taxpayers to compare their current fund with the low-cost winners of the default tender. These reforms may reduce the revenues of superannuation funds. More importantly, they will reduce the unpleasant sting of high fees on the superannuation balances of Australians

Digital disruption: STEM graduates and more regulation not the answer

A complacent government could easily adopt a wait-and-see approach when it comes to the effects of technology on our economy, but a report from the Productivity Commission advocates what governments need to do to confront digital disruption - get out of its way, writes Jim Minifie

Australia's growing peer-to-peer economy

Millions of people around the world are using peer-to-peer platforms for everything from booking a holiday, using a ridesharing business, or even finding a tradesperson. Uber and Airbnb are two of the biggest names in Australia’s growing peer-to-peer economy. But governments here and abroad are struggling to figure out how to regulate these peer-to-peer share companies in a way that strikes a balance between protecting consumers and existing competition laws, while encouraging efficiency and innovation. According to a new report from the Grattan Institute, there\u27s much to be gained if governments catch up, something in the order of $500 million of savings to the Australian economy

Peer-to-peer pressure: policy for the sharing economy

The rise of the sharing economy can save Australians more than $500 million on taxi bills, help them to put underused property and other assets to work, and increase employment and income for people on the fringe of the job market. The prize for getting this new online economy right is large and governments should not try to slow its growth in order to protect vested interests. Peer-to-peer platforms such as Airbnb and Uber use online technology to help strangers interact and do business. Platforms host markets in accommodation, travel, art, finance and labour, among other fields. While the private sector will drive the peer-to-peer economy, government can play an important role to support its growth while reducing any downsides. Some say peer-to-peer platforms bring hidden costs by risking work standards, consumer safety and local amenity, and by potentially eroding the tax base. These worries are not groundless but they should not be used as excuses to retain policies, such as taxi regulation, that were designed for another era and no longer fit. State and territory governments should follow the lead of New South Wales, the Australian Capital Territory and others, and legalise ride-sharing services such as Uber. In peer-to-peer accommodation, local councils should allow short-stay rentals run by platforms such as Airbnb, but state governments should give owners’ corporations more power to limit disruptions caused by short-stay letting. Tens of thousands of Australians are already working on peer-to-peer platforms. These platforms will mostly improve an already flexible labour market, but governments must strengthen rules to prevent employers misclassifying workers as contractors, and bring some platform workers into workers’ compensation schemes. Tax rules must be tightened to ensure that platforms based overseas pay enough tax. Not all traditional industries are happy with the rise of the peer-to-peer economy, but if governments act fast, consumers, workers and even the taxpayer can come out ahead