Activity 10(e)

Activity 10e: The ongoing investment in the NBN

  1. It can increase aggregate supply by improving the speed at which telecommunications can occur and therefore make it more viable and efficient to undertake many activities that were previously done face to face and at higher expense – such as shopping, conferencing, medical appointments and even education. In particular, those entities in more remote or regional areas had the improved capacity to compete in the broader marketplace and entities more generally were better positioned to tap into global markets.  Productivity therefore increased because the production of goods and services across the economy could effectively be produced with fewer inputs (e.g. fewer labour hours involved in physically commuting to perform tasks).  This increased aggregate supply because the nation had the capacity to produce more goods and services than before.


  1. As productivity improves (for the reasons outlined above) it ultimately reduces pressure on prices which in turn increases Australia’s international competitiveness as we are in a better position to compete against foreign businesses in the global marketplace.


  1. In the 2022-23 Budget, the government injected a further $480 million into the NBN in order to deliver a faster wholesale Internet speed for regional Australia. Given that improved Internet speeds can ultimately improve productivity and efficiency, as described above, it will therefore help to boost the capacity of the economy to supply goods and services (i.e. increase aggregate supply).


  1. I reliable broadband network can assist with the achievement of all of the key macroeconomic goals of the federal government. Price stability is more likely to be achieved because the reduction in prices will help to contain inflation to within the 2 – 3% target band. With lower inflation, international competitiveness increases which stimulates aggregate demand and a stronger and more sustainable (low inflationary) rate of economic growth can be achieved. The stronger rate of economic growth should also assist with a reduction in the rate of unemployment towards the full employment (NAIRU) level approximately 4.25%.


  1. Personal response required.
  2. Personal response required.


  1. The rollout of the NBN program highlighted a number of weaknesses associated with the delivery of these types of aggregate supply policies. This includes the potential that the opportunity costs associated with the investment have not been minimized, which is a claim made by many critics of the NBN rollout and effectively means that the net benefits of the investment may have been negative.  In addition, the political influence on decision making, with both major parties being in power at certain stages of the rollout, made it more likely that poor decisions were made (e.g. decisions that were focused less on what was in the best interests of Australia and more on political considerations).  In addition, the implementation and impact lags associated with a project of this size meant that changes in technology resulted in some aspects of the rollout being sub optimal. However, to the extent that access to a reasonably fast internet would not have occurred to the extent we see today (e.g. across regional Australia) without the huge government investment then it is reasonable to argue that the investment has been sound.  The positive externalities conferred to members of society (e.g. those in rural areas being better connected to family and friends and the spin off benefits this provides).