For macro policymakers, the benefits of the New Economy paradigm are the better choices and behavior that come with more information and transparency. Public revenue authorities should be able to curtail tax evasion, reduce administrative costs and thereby either use budgetary resources for specific needs or reduce rates of taxation. A clearer view of which poverty reduction programs are effective may be achieved through the diffusion of ICT, allowing policymakers to better target their programs to achieve results at lower cost. Finally, greater transparency in the New Economy means citizens can demand and receive superior government services for their tax dollars.
Thus government must be more responsive in the New Economy paradigm, because the cost of providing services will be better known, the results more visible, and analysis of the performance of governments compared to others more pervasive. These fundamental and pervasive changes in the way individuals, firms, governments, and markets work are why the ICTs themselves are the obvious and simple part of the New Economy, but they are not the only, nor even the key, ingredient to its fundamental benefits. Evidence on Productivity Growth and the Use and Diffusion of ICTs Policy makers and economists have always cared about productivity.
Rising productivity is critical to long-term economic growth without inflation. Rising labor productivity is an important source of rising real wages and family income. But what are the sources of productivity growth, and can we observe a change in trend right now in some economies? Two members of APEC—the US and Australia—offer examples that highlight the roles for information and communication technologies, structural policies, and competitive and flexible markets for products as well as workers. In the last half of the 1990s, both the United States and Australia have enjoyed a surge in employment and non-inflationary income growth.
The US continues its longest period of economic expansion ever recorded: GDP growth averaged more than 4 percent per year from 1995 to 2000. 22 Australia enjoyed 13 consecutive quarters of GDP growth in excess of 4 percent during the 1990s – the longest period of such rapid growth on record. 23 Do common characteristics underpin the economic performance? In the most recent Economic Report of the President , the US Council of Economic Advisors (CEA) noted that between 1995 and 1999 fully one-third of American output growth came from increased spending on information technology.
About one half of the increase in labor productivity came from capital spending on information and communications technologies (hardware and software). For Australia, about one-third of the increase in Australian labor 22 US Council of Economic Advisors (2001) The Economic Report of the President, Government Printing Office: Washinton. 23 Australian Treasury. www.budget.gov . au/papers/ - 25-