In the last two days, Federal Ministers from the Prime Minister down have urged Australians to spend, spend, spend so the Australian economy avoids recession.
There is evidence the recession has already hit the Government ICT sector, so it may be time for governments to do the same thing in relation to their own spending on ICT.
- The September quarter National Accounts data released last week by the ABS shows total government spending as a percentage of GDP was at its lowest since 1988;
- Intermedium’s analysis of AusTender contracts data shows in the year ended 30 June 2008, Federal Government spending was down over 17% on 2006-07;
- Moreover, preliminary data for the first five months of 2008-09 shows a continuing decline in Federal ICT of around 14 percent compared with the same period in 2007-08 (which included the election caretaker period).
While Intermedium urges caution in such comparisons of AusTender data, especially in the short term where the likelihood of revisions and late reporting is high, nevertheless the trend data indicates a continuing decline in Federal Government spending on ICT.
This downturn is affecting suppliers, and retrenchments are already underway. It is the direct effect of government policy and action, and comes on top of the global financial crisis that has affected banking and finance, resulting in a downturn in these and flow-on segments as well.
In short, the Australian ICT industry appears to be in recession, now!
This is not intended to support profligate programs, but rather to suggest, especially in light of the support in the Gershon Report for capability-building, that “right now” might be a good time to start bringing some important capability-building projects forward. Many of these are in agencies’ forward procurement plans and are clearly identified in Intermedium’s scout it business prospecting tool. Bringing these forward would reduce the impact of the global crisis and, most importantly, preserve the Australian ICT industry skills base at a very critical time.
Unlike the motor vehicle industry and various other sectors that have recently come cap in hand to Canberra, this is not special pleading. It is simply a suggestion that because the political and electoral cycle caused a premature downturn in spending, it might be time to recognise the impact of this, and bring forward some spending that builds Government capability, while sustaining the ICT supply sector.