An NBN remedy to mining malaise

It is patently clear that at a certain stage the current mining boom in Australia will diminish and this will invariably have a negative effect on the overall financial and economic situation of the country. While this will not have a significant direct impact on employment it will decrease the country's overall wealth, and a squeeze in that area will have an effect on all aspects of the economy.

Money will become more expensive – government projects and funding will be tightened, house prices will be put under pressure and so on. However, the damage caused by such a scenario could be greatly mitigated by the presence of the NBN.

What we will have is a classic case of ‘Dutch Disease' and given the fact that I actually lived through a bout of this in the Netherlands of the 1970s, I know a thing or two about this economic malady. Large gas fields had been discovered in the late 1950s in the north of the country, bringing about an enormous increase in national wealth. As a result the value of the currency went up, manufacturing became less competitive and the country lost quite a few industries to lower wage countries, at that time in southern Europe and northern Africa.

There was also a massive increase in social welfare services as the government's policy was that this new wealth should be shared with the entire population. This created a large number of jobs in these sectors, taking them away from other more traditional employment sectors, and to keep those sectors (mainly manufacturing and cleaning) running cheap foreign labour from southern Europe and northern Africa was imported into the Netherlands.

Of course, it is hindsight that makes it possible to describe all of this so concisely in a single paragraph. The phenomenon now known as the Dutch Disease was not actually analysed until at least five years after the effects became clear. The trouble started after the two oil crises in the 1970s. The effect was not an economic but a psychological one. People became more concerned, spent less and there was a lot of political pressure on the need for spending cuts etc.

At that time, however, there was no way back for the sectors that had disappeared or shrunk – other countries had taken the economic lead there. Spending cuts also meant an increase in unemployment.With the lessons learned from this and from similar events around the world we can now better prepare ourselves for the inevitable downturn after the mining boom.

One of the strategies to reduce the effects of the disease is to ‘sterilise' some of the mining money – not let it flow directly into the economy but, for example, invest this newfound wealth in infrastructure that will assist in stimulating other parts of the economy that can take over once the mining boom subsides.

This is where broadband kicks in. By the time the downturn occurs a significant part of the NBN should be in place, substantial enough that it will have created sufficient mass to start building new business models on top of this infrastructure. That should assist the country in building more sustainable new economic opportunities in the future. By then Australia will be leading the world in actually having the largest high-speed network in the world (if not in size, certainly per capita). This will create interesting export markets.

Worldwide the emerging digital economy is seen as essential in enabling economies and societies to make progress, so internationally this is where the new wealth will be created in 10 and 20 years' time.

Therefore, in order to future-proof our economy it is essential to make sure that we can move from the mining boom to the digital economy boom, hopefully without too much of dip in between.

Obviously many more policies need to be in place to prevent Australia from catching a serious bout of the disease, but investment in a robust national digital infrastructure will be an essential part of any remedy.

Paul Budde is the managing director of BuddeComm, an independent telecommunications research and consultancy company, which includes 45 national and international researchers in 15 countries.