The technology sector is a large and significant part of the New Zealand economy, generating considerable value, jobs and exports, new research says.
The NZTech Institute’s first Digital Nation New Zealand, from tech sector to digital nation report notes that nearly 29,000 tech sector firms contribute $16.2 billion or eight per cent of gross domestic product (GDP).
New Zealand exports $6.3 billion of tech goods and services – or nine per cent of all exports. Almost 100,000 people, or five per cent of the workforce are employed in the tech sector and an additional 20,000 tech workers work in other sectors. In addition, the tech sector has the highest paid and higher qualified employees than all other sectors on average.
“ICT’s contribution to GDP growth in New Zealand has been higher than in any other country in the Organisation for Economic Co‑operation and Development (OECD) from 2001 to 2013,” NZTech chief executive Graeme Muller reveals.
Each new tech sector job creates up to five new services jobs around it. “Each four per cent productivity improvement in the tech sector is estimated to deliver an additional $2.7 billion of GDP.”
Investment to grow the tech sector could deliver three times return to the economy, Muller says. “Every $1 of productivity stimulus in the tech sector will generate $3 of growth across the national economy.”
New Zealand companies are well connected to the Internet. “A total of 97 per cent of firms (with more than five employees) use computers and 96 per cent use the Internet.”
Even the least connected sectors are well connected, with 91 per cent of primary sector firms using the Internet.
Yet even though Kiwi companies are well connected they are not taking advantage of Internet services, Muller claims. “Firms that are making smarter use of Internet services are six per cent more productive than average firms in their industry,” he says.
If all New Zealand firms made smarter use of Internet services it could lift GDP by $34 billion. “Small-to-medium enterprises that are highly digitally engaged, have higher revenues, 20 per cent faster growth and stronger job growth than firms that are less digitally engaged.”
Moreover, each 10 per cent improvement in broadband penetration delivers an estimated $3.3 billion to an economy. “Increase used of ultra-fast broadband (UFB) is expected deliver an estimated $5.5 billion to GDP over the next 10 years.”
Making better decisions using data in 2014 provided $2.3 billion in benefits to the economy. “It is estimated better use of data by business and government could deliver $4.5 billion over the next five years.”
Network necessity
The economic impact of the Internet and the importance of the underlying networks are beyond question, Muller says, but New Zealand must ensure that network builders and the operators using them continue to have incentives to invest to maintain its global competitiveness.
“The regulatory frameworks for telecommunications after 2020 are a current item of discussion,” he notes. “We want to see the government carefully consider the importance of certainty in the telecommunications regulatory framework when looking at how best to regulate ultra-fast broadband (UFB) services from 2020.”
The NZTech Institute believes the largest economic growth opportunities from the Internet will come from businesses and government organisations throughout New Zealand effectively using Internet services better to improve their productivity. “We recommend the government continues the efforts to help New Zealand businesses secure the benefits of increasing use of Internet services.”
He says New Zealand is “well placed” among developed countries in the rollout of fibre, wireless and international cable networks. “The government’s UFB programme and Rural Broadband Initiative (RBI) are advanced and these networks are critical drivers of economic activity, productivity growth and employment across the economy,” Muller says.
By December 2015, the UFB network was available to 875,000 households and businesses, 60 per cent of the total target of connecting 1.459 million households and businesses with fibre to the premises by the end of 2019. “The 1.459 million households and businesses correspond to network coverage of 75 per cent of New Zealanders.”
The critical network infrastructure for delivering fast Internet connection is not limited to fibre deployment or fixed networks. “With the growing trend of mobility and the use of mobile data the mobile networks are also an essential part of the underlying connection fabric,” Muller adds.
Mobile data traffic in New Zealand is forecast to grow at a compound annual growth rate of 43 per cent and is now measured in exabytes or a billion gigabytes. “In New Zealand in 2015 mobile data exceeded 0.1 exabytes, which may not sound much but it’s equivalent to 10 per cent of all global traffic only 15 years ago,” Muller notes. “Most of the demand has been coming from the growth in smartphone connections, but as the Internet-of-things grows, machine-to-machine connections are also growing rapidly.”
With the demand for data comes the demand for speed, so a continuous evolution of mobile networks is needed. “The transition to 4G, fourth generation mobile network infrastructure, is still underway and already the telecommunications companies have started planning for 5G, which will only be a few years away from deployment.”
Investment in telecommunications is high in New Zealand, Muller insists. “New Zealand is near the top of the OECD rankings in 2013 for the proportion of telecommunications revenue that was invested by operators,” he says. “Total telecommunications investment reached $1.7 billion in 2014, including the UFB and RBI investments.”
Big benefits
Continued investment in, and use of, technology could benefit several sectors, first and foremost agriculture as reigniting the rural productivity that is critical for farmer profitability and New Zealand’s global competitiveness, Digital Nation New Zealand, from tech sector to digital nation says.
“Future expansion, particularly in dairy, is now challenged by the impact of land use on water quality,” Muller says. “Digital agriculture, in the form of precision farming, big data, sensor technology and drones, delivers a new potential for productivity gains across rural New Zealand.”
The rollout of networks and the increasing availability of Internet connectivity, especially driven by the Rural Broadband Initiative, are enabling transformation in the way the agricultural sector operates and how suppliers integrate into the supply chain from pasture to plate. “There are significant positive impacts available from connecting farms to broadband and from relatively simple data sharing applications.”
One example is Fujitsu, which has developed a connected cow product that detects oestrus signs in dairy cattle from changes in step count data. Cows are fitted with pedometers, connected to on-farm receivers. Step count data is transmitted to a Microsoft Azure cloud-based service that detects oestrus signs and sends an alert email to the dairy farmer.
A sharp increase in the step count is a reliable indicator of oestrus. Dairy farmers can arrange for insemination at exactly the right time, a huge time saver that improves farm management and reduces the lost opportunities from missing the signs of oestrus.
Another example is New Zealand hi-tech sensor company, Outpost Central, whose sensors are being used on farms throughout the world to make informed decisions about how much water to irrigate where to obtain maximum growth with minimum water.
Internet connectivity and broadband also brings the prospect of increased digital customer interactions for businesses such as Alliance, Farmlands and Fonterra. Digital agriculture, in the form of precision farming, big data, sensor technology and drones, delivers a new potential for productivity gains across rural New Zealand, the report says.
Research undertaken by Coriolis Research found that New Zealand provided about $1.2 billion worth of agritech exports in 2013. A comparison between New Zealand’s agritech exports and its key competitors shows New Zealand is underperforming in the absolute size of agritech exports but is showing good growth. As the fastest-growing tech sector globally, agritech provides New Zealand with enormous opportunities for export growth.
Manufacturing movement
Similarly, New Zealand manufacturers that evolve fast to new technologies, leveraging sensors, data analytics, additive manufacturing and virtual reality will be able to compete well on the world stage, the NZTech report maintains.
“The export success of the tech sector’s high-tech manufacturers is testament to the ability of New Zealand manufacturers to leverage advanced technology to take on the world,” Muller says. “Global additive manufacturing is expected to reach US$20.4 billion by 2019, which is nothing compared with a global manufacturing market worth approximately US$11 trillion.”
The report says tech sector growth helps in many ways, especially income generation, cost reductions, new or better product and new production techniques. Numerous technological developments are transforming the manufacturing and retail sectors. In manufacturing developments are occurring in materials science, 3D printing, sensors and robotics.
Retail is being revolutionised by the growth of online sales and mobility. Both manufacturing and retail are being shaped by the Internet of Things, where parts and machines are connected to the Internet. Improved Internet connectivity is benefiting both the retail and manufacturing sectors by enabling the connection of goods, machines, suppliers and consumers to each other.
Digital technologies are starting to disrupt the manufacturing sector as they have the media, finance and other sectors, the report notes. New computing capabilities and increasing data, along with advances in automation, robotics, additive technology, artificial intelligence and human-machine interfaces are unleashing innovations that are disrupting manufacturing.
But while some manufacturers are recognising the opportunities – and threats – of digitisation, few are responding in a comprehensive, coordinated way, the report warns. “Manufacturing generates more data than any other sector of the economy yet few companies are harnessing it,” Muller says. “Manufacturing companies that invest in technology to capture and understand the data they generate will uncover valuable insights to drive profits and growth.”
NZTech is the voice of the New Zealand technology sector and represents over 300 organisations and 57,000 tech employees from across the New Zealand technology landscape, from startups and local tech firms to multinationals and from ICT to high tech manufacturing.
