Australian tech sector shrinks 2.6%

Australia’s tech sector has shrunk for first time in 17 years. Is our digital economy at risk?

Australia’s technology sector has recorded its first decline in nearly two decades, shrinking by 2.6% in the 2023–24 financial year even as the broader professional services sector grew by 2.5%.

The drop, revealed in new analysis we’ve undertaken, signals what some see as a critical warning for Australia’s digital future.

This isn’t just a statistical blip, it’s a warning signal. While large Australian businesses have been importing technology solutions, other countries have been investing in their own digital economies. The result is our $43 billion tech sector now contributes just 1.7% of GDP and it’s shrinking.

The timing couldn’t be more important

Just last month, the NSW Government announced a $79.2 million Innovation Blueprint aimed at supporting local startups and boosting digital capability. Initiatives like this could help reverse the trend but only if businesses get on board.

Programs like the Innovation Blueprint provide the catalyst needed to build local capability instead of continuing to rely on offshore solutions.

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The risks of outsourcing aren’t just about lost jobs

When Australian businesses outsource their technology requirements overseas, they export jobs, intellectual property and future growth potential. The sector’s contraction shows where that strategy leads.

Keeping digital capability on-shore is critical to drive the innovation that is itself critical for lifting Australia’s recessionary productivity rate.

We saw the effects of a hollowed-out manufacturing base during Covid. As we enter into a world dominated by AI, we cannot surely want to be a country without its own capability and technology innovation. Not just for technology’s sake, though to lift Australian businesses through their investment in their own technology.

Australian tech success stories like Canva and Atlassian as proof that local investment pays off.

Companies like Canva and Atlassian show we can compete globally when we invest locally. If we want to avoid another 2.6% decline next year, Australian businesses and governments need to start building their digital future here, not buying it from overseas.

Get in touch

If your organisation is thinking about its next digital move, we’re always open to a conversation. Let’s build the future locally. Reach out via email at hello@airteam.com.au or via our contact form.

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About the data: The data analysed by Airteam for this release uses the latest June 2024 ABS data on Gross Value Add; the industry contribution to GDP, using the Computer system design and related services industry as a measure of the total size of the software development industry in Australia, and the change in Gross Value Add annually.