Inside the joint A/NZ Productivity Commission report

Published on the 28/02/2019 | Written by Jonathan Cotton

AU_NZ joint productivity commission report

We’ve got a trans-Tasman framework for e-invoicing and the opportunities to cooperate – and prosper – are myriad, says report…

The joint report from New Zealand and Australia’s Productivity Commissions, Growing the digital economy in Australia and New Zealand, looks at the challenges and opportunities created by the digital economy, identifies key opportunities for Australiasian collaboration, and wonders aloud what institutional and regulatory settings will support greater use of digital technologies downunder.

The report, released last week, is part of a greater push for cooperation between Australia and New Zealand across both public and private sectors: The launch was also an occasion to announce an agreement to establish an Australia New Zealand Electronic Invoicing Board, which will advise both governments.

“The new board represents the collective interests of both countries and will set the direction for how e-invoicing will be rolled out over the next few years,” said New Zealand Prime Minister Jacinda Ardern at the Australia New Zealand Leadership Forum in Auckland last week.

“E-invoicing could save trans-Tasman businesses over $30 billion in transaction costs in 10 years.”

“This collaboration between government and business is focussed on creating greater interoperability for a single digital economic market. It is estimated that e-invoicing could save trans-Tasman businesses over $30 billion in transaction costs in 10 years.

“There is great potential for e-invoicing to be a game changer for small and medium enterprises and the wider business sector. It will improve productivity and reduce the costs of doing business by allowing the direct exchange of invoices between the financial systems of suppliers and buyers.”

While the claimed numbers sound attractive, as we have pointed out previously, there has not been anything stopping trans-Tasman e-invoicing or other document exchange where it makes good commercial sense. EDI standards have existed for decades, so quite how the newly minted trans-Tasman standards will remove whatever barriers are seen to exist is not clear (but let’s guess that both Xero and MYOB are involved based on their multiple mentions throughout the document).

So what does the report actually say?

It makes several key suggestions around data sharing, digital financial services and digital trade but also highlights three areas for urgent items for discussion before a long term strategy can begin to be implemented. Regulations, says the report, should be “nimble and technology neutral”, government services should be improved with the use of digital technology, and Australia and New Zealand must work together to reduce barriers to regional and international trade.

Among the most pressing of those issues is fit-for-purpose regulation, says the report.

“Digital innovation is putting many regulatory regimes under pressure,” it says, and technology has a habit of changing “at a faster pace than regulators can manage”.

“It creates new goods and services (everything from video streaming services to driverless cars) that current regimes did not anticipate, or where the responsibilities of multiple regimes overlap or are unclear.”

The report says regulators are too often caught “playing catch-up” with the digital world, and as regulation lags, the potential continues to arise or the formation of “uneven playing fields” in which incumbent firms – and sometimes even new entrants – unfairly benefit.

“There are instances where new entrants have taken advantage of regulatory loopholes to grow unhindered by the regulations that incumbent firms must comply with,” explains the report.

“Nonetheless, some regulators in Australia and New Zealand, such as those overseeing financial markets, have responded to the emergence of innovative firms by creating new tools to support start-ups, while maintaining regulatory oversight.

“Traditional principles for good regulation remain highly relevant,” says the paper, advising that regulatory regimes should be technology neutral and subject to regular review.

The paper demands more thorough and committed approach to digitising services across government.

“‘Digital government’ remains far from a reality,” says the report.

“Because the transaction costs created by government interactions can fall more heavily on smaller firms than on larger ones, further reductions in those costs could be particularly beneficial to SMEs.

“Governments in Australia and New Zealand are yet to realise the full potential of data and digital technologies for the delivery of public services. To do so will require complementary investments, capability building, and sometimes cultural and organisational change.”

The proposals
So, housekeeping aside, just how can Australia and New Zealand work together to better serve SMEs?

It’s a holy trinity of improved data sharing, better digital financial services and streamlined digital trade, argues the report,

With “minor changes and clarification” to privacy legislation, Trans-Tasman sharing of credit information could be enabled, says the paper, improving access to finance for individuals and SMEs operating across Tasman lines. (Currently Australian credit reporting bodies aren’t permitted to share credit information with organisations that do not have links to Australia).

“Financial markets run on information. Credit providers base their lending decisions on credit history and other information, including that required to assess management quality and to understand business models and future expansion plans.

“It can pose difficulties for SMEs if such information cannot flow between providers and across borders. The difficulty in assessing intangible assets can make access to credit problematic for small innovative firms.”

It’s clearly the potential around fintech driving much of the excitement: The paper speaks in hopeful terms around the possibility of joint open-banking standards across Australia and New Zealand, or a ‘trans-Tasman financial system’.

Just what that could look like isn’t explained in a lot of detail, but it would include “protocols that allow greater consumer access and use of data collected about them by financial institutions”.

Australia and New Zealand could cooperate in developing joint open banking standards it says, or “at the very least, New Zealand could join the development committee as an observer”.

Next on the agenda: streamling trade.

“The trade compliance system is complex and cumbersome, with many processes still paper-based, particularly in Australia,” laments the report. “However, both countries are working towards digitalising trans-Tasman trade, introducing mutual recognition of supply chain security and trialling a ‘secure trade lane’ for international mail, aimed at simplifying compliance for SMEs.”

In future says the paper’s authors, regulators on both sides of the Tasman could consider aligning standards for the data collected from importers and exporters, such that data is collected once and shared across borders.

And that digitisation could extend towards a cohesive, trans-Tasman digital identity.

“The New Zealand Government has recently commenced a new research programme to develop rules and standards for its digital identity programme. In Australia, the Digital Transformation Agency is building an identity framework, based on a federated model… In future, New Zealand organisations could consider gaining accreditation for the DTA system, which would enable individuals and firms to use New Zealand credentials to verify their identity in Australia.

“Beyond these policy areas, regulators and policy makers on both sides of the Tasman should continue to work together and share information, as they develop their responses to the challenges of the digital economy.

“They should lead by example in using data to develop better policy options, while balancing community expectations of privacy.”

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