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Chapter Six
Policy implications and next steps
What are the key points that can be drawn from this pilot study? This
Chapter outlines some observations about the magnitude of the change
envisaged, implications for policy and further analysis of this
important issue.
Additional output in the order of 2.7 per cent of GDP as a consequence
of greater use of e-commerce should not come as a large surprise. The
fact that market participants are embracing the new technology at a pace
that is astonishing indicates that there is already widespread agreement
that the opportunities are extensive.
It is important to place the magnitude of the forecast impact into context.
The result should be viewed as the net gains from the transformation to a
more efficient business mode. It may seem a small number relative to
most other values that are bandied about regarding e-commerce, but then
most efficiency gains are about seemingly small changes at the margin. It
is hard to find assessments of changes in the way that business is done
which have simulated growth dividends as big as that found for
e-commerce. The only example that comes to mind in the consulting team
is the Industry Commission’s simulation of the Hilmer reforms. By
adopting a very broad view of the savings which could be attributed to
the successful implementation of Hilmer, the Commission found a
consumption gain of about three per cent compared to the 3.2 per cent
increase in consumption due to e-commerce as modelled in this study. 20
Other microeconomic reforms such as tariff cuts generate relatively
negligible gains. For example, in their final report on the Motor Vehicle
Inquiry of 1997, the Commission showed a sustainable consumption gain
from the proposed reduction in tariffs of 0.3 per cent. 21
It is important to note that the MONASH model generally assumes the
efficient functioning of markets in the long run. Obtaining the estimated
net benefits depends, therefore, in part upon continued success in the
government’s pursuit of other crucial microeconomic reforms. This would
ensure that businesses pass on cost savings that stem from e-commerce
and that the market is able to adjust smoothly to the substantial transition
that is to come. This in turn requires ongoing commitment to maintaining
competitive product markets, increasing the flexibility of labour markets
and continuing to enhance the efficiency of capital markets.
High expectations notwithstanding, the outlook for greater use of
e-commerce should not be taken for granted. The technology is still at an
early stage. While it appears to be entrenched for business purposes, the
popular appeal may fade. Retailers may find that e-commerce is merely
another marketing channel. Policy decisions taken by government may
make or break the appropriate environment for the use of e-commerce
to expand.
This finding reinforces the current thrust of the Commonwealth
Government’s approach to policy. The benefits are of such an order of
magnitude that the government should continue to seek to ensure rapid
adoption of e-commerce. It should continue its thrust of seeking to
remove or alleviate the impact of market impediments.
20 Industry Commission.
21 Productivity Commission, The Automotive Industry, Volume II: Appendices, Report No. 58,
26 May1997.
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