Energy and innovation drive competitiveness
Two recent reports highlight opportunities to improve the productivity and competitiveness of Australian industry. One focuses on energy, the other on innovation.
A new report from ClimateWorks Australia, Australia’s Energy Productivity Potential (March 2015), focuses on the growing role of energy in productivity and competitiveness. The report notes that the nation’s energy costs increased by 67% to $120 billion in the decade to 2012. ClimateWorks finds that improving energy productivity, including energy efficiency, is a significant means of boosting the overall productivity of the economy.
Greater energy productivity can also address issues related to energy supply chains, minimising risks and pollution from the extraction of coal and gas, and potential interruptions in the supply of oil. The report indicates that while Australia has made some progress in energy productivity, it lags behind other G20 countries and may drop further if improvements are not implemented. ClimateWorks’ research shows that potential exists to bridge the gap and ensure that Australia keeps pace with other countries.
The report shows that around two-thirds of improvements can be achieved by modifying the way energy is used in the economy, through:
- energy efficiency in technologies and processes
- electrification of vehicles and logistics, rather than petroleum-based machinery
- optimisation of systems, and structural change towards less energy-intensive activities.
The remaining third of the opportunity is in improving the way energy is supplied, by:
- more efficient forms of energy generation/transformation
- reduction in losses from distribution of energy to end users.
This analysis involves a major overhaul of the energy system, but relies on technologies that are already available or in development. Future innovations or technological breakthroughs could increase the potential even further.
The Australian Innovation System Report (2014), released recently by the Office of the Chief Economist at the Department of Industry and Science, examines various aspects of innovation as a driver of competitiveness.
Innovation across all of industry is a key strategy to lift long-term productivity. The report defines innovation as ‘the implementation of a new or significantly improved product (good or service), process, new marketing method or a new organisational method in business practices, workplace organisation or external relations’.
Around 42% of employing businesses were deemed innovative in 2012–13.These enterprises accounted for a 70% share of the economy’s employment, capital expenditure and income. Several Australian industries (mostly in the resources sector) are internationally competitive and have a high innovation capability.
The report finds that Australia’s innovative businesses are:
- 31% more likely to increase income and 46% more likely to show increased profitability
- twice as likely to export and five times more likely to increase the number of export markets targeted
- twice as likely to report increased productivity, employment and training
- three times more likely to increase investment in ICT
- three times more likely to increase the range of goods and services offered.
The results suggest that innovation is a key factor in growing a competitive business across all sectors and sizes.
Read more about the Australian Innovation System Report - 2014.