Australian government IT spending to grow 8.4% in 2023

IT spending by the Australian government is expected to grow by 8.4% to reach almost A$17bn in 2023, driven by digital investments to improve operational efficiency, according to Gartner.

The growth in spending, which has slowed down over the past year amid the government’s belt-tightening moves, will be led by software, the highest growing segment in 2023.

“The current economic disruption and inflation pressures across Australia continue to increase prices, stall wages and keep the government focused on austerity, both at the state and federal levels,” said Dean Lacheca, vice-president analyst at Gartner.

“In response, the Victorian Government has just announced it will reduce its workforce by up to 4,000 public servants, along with the federal government reducing its reliance on external IT contractors. This will see government increasingly look to digital investments, particularly automation, to drive efficiency opportunities and improve service delivery,” he added.

Globally, government IT spending is set to hit $589.8bn this year, an increase of 7.6% from 2022. Like their counterparts in Australia, government CIOs elsewhere are also facing similar challenges with inflation and workforce scarcity, along with competing demand from the commercial sector.

Those factors have spurred investments in digital programmes, including application modernisation which over half of government CIOs are expected to spend more on this year, up from 42% in 2022.

An increasing number of government institutions are also putting in place at least one digital metric linked directly to outcomes associated with their public purpose or mission. By 2026, over 75% of governments are expected to gauge digital transformation success by measuring the enduring impact of their investments.

Even as government spending on IT services will continue unabated in 2023, governments will face compensation constraints and limited resources to attract and retain IT staff amid the talent crunch, noted Apeksha Kaushik, principal analyst at Gartner.

And so, to continue modernising critical IT infrastructure and applications, some government organisations will have to embrace a multi-sourced workforce strategy by optimising the use of internal IT talent, investing in employee experience tools and partnering with external IT service providers.

Throughout 2023, government organisations will also continue to invest in initiatives that improve access to digital services as citizens increasingly demand experiences that are equivalent to online customers.

While digital transformation remains a top priority, some government CIOs have indicated that they are not maximising the benefits of their digital investments.

“Government CIOs who are moving beyond scaling digital solutions across their critical services are ensuring that further investment in digital solutions can directly impact how they achieve the mission or public purpose of their organisation,” said Kaushik.

Earlier this month, the Australian government unveiled a federal budget that includes significant and targeted investments in digital and ICT capabilities such as cyber security, data protection and artificial intelligence.