The Economic Impact of Robotics and Automation

The Issue

Queensland has been found to be falling behind most of the developed world in terms of sustained investments in automation and robotics. Identified costs associated with falling further behind are:

• the opportunity cost of inaction, such as lost additional Gross State Product (GSP) and net employment growth;
• declining productivity and competitiveness, which would in turn deteriorate terms of trade, export revenue and thereby government spending; and
• outflow of skilled labour, as they seek opportunities in robotics and automation around the globe.

Our solution

Capacity to absorb technological change through areas of comparative advantage

To identify areas of the Queensland economy where there is a comparative advantage for automation and robotics, the report carried out the following tasks:

• examined GSP, including its main components;
• assessed statistical information on employment by industry (through the Australian and New Zealand Standard Industrial Classification, or ANZSIC) and by occupation (through the Australian and New Zealand Standard Classification of Occupations, or ANZSCO); and
• analysed employment forecasts to 2030 in terms of skill mapping and projected bottlenecks.

The main finding from this section of the report was that a new wave of automation and robotics is needed to arrest the productivity slow-down in Queensland and increase job opportunities. The propensity of each industry sector to become automated was summarised in a table.

Insights from international experience

Following a comprehensive review of international literature and our own research, the lesson for the Queensland economy was that technological change from an acceleration of the automation and robotics process would add to rather than cost total employment. While there would be changes in job and task mix within each industry, creation of new types of job and the likelihood of relative employment declines in some industries, this was revealed to be the nature of the job creation (income effect) and destruction (substitution effect) process as observed in most economies over time.

Benefits to the Queensland Economy

Based upon anticipated productivity growth and parameters derived from international studies, the following three scenarios were examined to estimate the potential benefits of automation through an exponential growth equation:

• Scenario 1 (Conservative) – automation assumed to increase the rate of GSP growth by one per cent per annum;
• Scenario 2 (Most Likely) – automation assumed to increase the rate of GSP growth by 1.5 per cent per annum; and
• Scenario 3 (Optimistic) – automation assumed to increase the rate of GSP growth by two per cent per annum.

The main conclusion from the analysis was that the more Queensland embraces robotics and automation, the greater the benefits to GSP and net job creation.

Given the falling cost of robotics and automated systems, they are now in reach of small-to-medium enterprises that make up the bulk of the economy. This indicates that there exists an opportunity to enlarge the scope for automation in Queensland well beyond the dominant capital heavy industries of Agriculture, Mining and Manufacturing.

Following the analysis of scenarios regarding the speed and incidence of automation, the report provided recommendations for effective public policy tailored to areas where the economy could leverage the benefits of automation.

Outcomes

The full report and a summary flier were released to the general public in November 2018 (available on QUT’s website here). In view of the findings of our report, the Palaszczuk Government gathered leaders across industries for a landmark Roundtable and Summit (i.e. Future of Work – Skill and Industry Summit) to map out a practical transition to the workplace of the future.