Enhancing Productivity Through Digital Government

Australia has been a global leader in digital government for many years. However, as other nations and industries accelerate their transformation in the AI era, it is crucial for Australian governments to keep pace to avoid falling behind. The Federal Government's recent decision to convene the Economic Reform Roundtable was a timely and important step in building consensus on the role technology can play in enhancing national productivity and improving public services.

According to a new report by Mandala, modernizing outdated legacy IT systems and transitioning to cloud and AI-enabled platforms can unlock billions in productivity gains for Australia, while also strengthening cyber resilience and improving sustainability. Australia's declining productivity growth is not uniform across the economy, with the non-market sector, including public administration, education, and healthcare, lagging behind in productivity performance.

The report suggests that retiring outdated legacy IT infrastructure and accelerating cloud adoption by five years could save the Australian Government an average of $1.4 billion annually, equivalent to a 13% reduction in total IT costs. This would result in cumulative savings of $3.4 billion by 2030 and $13.5 billion over the next decade, equating to more than half of the Government's $22.7 billion Future Made in Australia commitments. Such savings typically require cuts to major programs or tax increases.

Currently, only 10% of government IT spending is on public cloud, meaning agencies rely on systems that cannot support the AI tools and productivity improvements needed. Accelerating cloud adoption could drive productivity gains, unlocking $1.4 billion every year, allowing staff to focus on higher-value work and transforming how government delivers services to the public.

Cloud technology is more than a cost-saving tool; it is the foundation for modern, secure, and resilient government services. It acts as a key pillar of the digital ecosystem, enabling the growth of Australian companies in areas like software-as-a-service (SaaS) applications and data centers. However, more than 70% of Commonwealth entities still rely on legacy IT systems that are costly to maintain, vulnerable to cyber threats, and a barrier to innovation.

Cloud infrastructure allows agencies to pay only for what they use, scale on demand, and avoid over-provisioning. It supports modern digital services, enables collaboration, and provides access to advanced technologies like artificial intelligence. Mandala estimates that accelerated cloud adoption could unlock an additional $5 billion in productivity gains through AI tools by 2035, representing a 63% increase compared to maintaining the status quo.