Macroeconomics of Offshoring

By Chamara Somaratne | Anthosa

Your business runs on tech. Behind every system, app, and tool are people who make it all work. Across Australia, these people are our ICT workers. They are the builders, thinkers, and helpers who keep our digital world running. They make the tools that help your team work together, your customers connect, and your business stay strong.

Many companies have moved ICT jobs to other countries to save money. It can look like a smart choice at first. Wages are lower overseas, and that can help a business grow faster and spend less. But this choice also brings big changes. As we rely more on tech, we need to think not only about saving money but also about what happens to our own economy when so many jobs move away.

Our ICT sector is more than a group of skilled jobs. It is part of what makes Australia’s economy strong. These jobs bring in money, help create new ideas, and keep our tax system stable. When these jobs move overseas, we lose more than just workers. We lose spending power in our towns. We lose chances to build new tools and ideas. We lose the taxes that help pay for schools, roads, and health care.

When one business moves jobs away, it might not seem like much. But when many do it, the whole country feels it. Fewer local jobs mean less money spent in shops and less support for local schools and homes. It also means fewer chances for young people to learn and grow in tech fields here at home. Over time, we risk losing not only money but also the skills and knowledge that help our country stay ahead.

This is not about stopping change or blaming companies. It is about balance. We can still work with global teams while keeping strong tech skills and jobs in Australia. We need leaders who think long-term and see the full picture. Keeping ICT work here means more than helping one company. It helps our whole nation stay smart, strong, and ready for the future.

In this discussion, we will look at what the data shows about ICT offshoring. We will see how it shapes our economy and what we can do to make better choices. Business leaders play a key role in this. You help decide if Australia stays a maker of tech or becomes only a buyer.

This is not just about cutting costs. It is about protecting the people, skills, and ideas that power our digital world. The choices we make today will shape how strong, fair, and ready our country will be tomorrow.

The Role of ICT in the Australian Economy

When we look at how Australia’s economy functions today, information and communications technology, or ICT, is at the very centre. It is not only a support function that keeps systems running; it is also a driver of growth, innovation, and productivity across nearly every sector. From banking to healthcare, from logistics to advanced manufacturing, ICT makes it possible for industries to remain competitive in a fast-changing global market.

The size of the ICT workforce

According to recent census data, more than 470,000 Australians hold ICT-related qualifications. Out of this group, around 334,000 are employed as ICT professionals and managers. This makes ICT one of the most skilled and specialised segments of the workforce. Importantly, these roles are not limited to coding or system maintenance. They include cybersecurity, artificial intelligence, data analysis, software development, and strategic technology management. Each of these areas has become critical to how organisations operate and grow.

Contribution to income and public finances

ICT professionals earn significantly more than the national average, with salaries around AUD 128,000 a year. This higher income is not just an advantage for individual households. It also translates into a strong stream of tax revenue for the government. Collectively, the ICT workforce contributes between AUD 17 and 18 billion in personal income tax every year. This makes ICT one of the most important sectors for sustaining our national budget. Unlike company taxes, which can fluctuate based on profits and business cycles, personal income taxes from high-skilled workers provide stability and predictability.

Impact on household demand and housing

The spending power of ICT workers flows into housing markets, retail, and services. With disposable income levels well above average, they drive demand in metropolitan areas such as Sydney, Melbourne, Brisbane, and Canberra. In housing, this translates into stronger demand for mortgages, rentals, and property development. Estimates suggest that ICT households contribute more than AUD 13 billion in annual housing expenditure. This level of demand does not only support construction and real estate, it also underpins the financial system that relies on mortgage activity as a stable source of lending.

Retail, services, and local economies

Beyond housing, ICT salaries fuel spending on retail, hospitality, travel, and recreation. Household demand from this group adds between AUD 25 and 30 billion to the economy each year. For local economies, especially in city technology precincts, this spending power is vital. Cafés, gyms, restaurants, and service providers often depend heavily on a steady flow of high-income ICT workers as customers. When these workers thrive, small and medium businesses in surrounding communities thrive with them.

ICT as a strategic enabler

Perhaps the most important role of ICT in the economy lies in its ability to enable other industries. Banks rely on secure and efficient digital platforms. Hospitals and health providers depend on ICT for patient records, telehealth, and medical technologies. Logistics companies use ICT for supply chain management and tracking. Manufacturers integrate ICT into advanced robotics and automation. In this way, ICT acts as a backbone for productivity and innovation across sectors.

Rising demand for technology skills

Looking ahead, the demand for ICT talent will only grow. The Tech Council of Australia projects that the country will need between 1.2 and 1.3 million technology workers by 2030. This is more than double the current level, signalling both a challenge and an opportunity. Without a strong domestic ICT workforce, our ability to meet this demand and secure our economic future will be at risk.

Understanding Offshoring in Context

Offshoring means moving jobs or services from one country to another to save money. For many years, this has been a common business plan. At first, it was used for call centers and back-office work, like customer service or data entry. Later, many factories and industries also moved overseas to find cheaper labor and bigger supply chains.

Now, ICT, or Information and Communications Technology, is part of this same trend. But ICT is different from making or shipping goods. It is about the digital systems that run every modern business. When ICT jobs move overseas, it changes more than just where the work happens. It affects how safe our computer systems are, how fast we can grow, and how strong our digital economy will stay in the future.

Other countries have already seen what offshoring can do. In the United States, researchers studied what they called the “China shock.” They found that when many manufacturing jobs moved to China, some U.S. towns lost jobs, wages fell, and whole communities weakened. Big groups like the OECD and IMF also warn that while offshoring can help companies save money at first, it can hurt countries later. It can make local workers lose skills, slow down new ideas, and increase risks like cyberattacks or global tensions.

In Australia, people often talk about offshoring in manufacturing or customer service. But now, ICT jobs can also be easily moved overseas. Because wages in other countries are much lower, many businesses see offshoring as a quick way to cut costs. The problem is that Australia’s economy depends deeply on ICT workers. These workers are not only needed to keep systems running, they help drive business growth, protect data, and keep the country safe from cyber threats.

This creates a big challenge. On one side, companies want to save money and stay ahead of competitors. On the other side, our economy, tax system, housing market, and national security all depend on keeping ICT jobs in Australia.

When one business offshores, it may seem like a small choice. But when many do it, it becomes a national issue. ICT offshoring is not just about company savings. It is about Australia’s future strength, safety, and independence.

Methodology

When we talk about the future of Australia’s economy, how we build our models is just as important as what the results show. For this study, the goal was to understand what might happen if many ICT jobs move to other countries over the next 25 years. To do this, we used a clear and careful method so that everyone can see not only the results but also how we reached them.

Data Sources We Relied On

Our model used data that is public and trusted. We used the Australian Bureau of Statistics (ABS) to find the size of the ICT workforce and their qualifications. We used Professionals Australia to find average salaries and the Australian Taxation Office for real income tax rates. We also used the ABS Household Expenditure Survey to see how people spend money. Data from the Treasury and the Reserve Bank of Australia helped with GDP growth, inflation, and household spending patterns. These sources made sure our model was based on real and current Australian economic data.

Scenarios We Considered

We looked at three different situations to understand how much ICT offshoring could change the economy:

1. Complete offshoring: All ICT jobs move overseas.
2. Near-total offshoring: 90 percent of ICT jobs move overseas.
3. High offshoring: 80 percent of ICT jobs move overseas.

In each case, we assumed that 70 percent of workers who lose their ICT jobs would find new jobs that pay less. The other 30 percent would need help from welfare programs. This gave a realistic picture of how people might adjust if high-paying jobs disappear from Australia.

Fiscal Framework We Applied

We studied how offshoring would change the government’s income and spending. The model included losses in personal income tax, more welfare payments, and less tax from household spending like GST. We also included some extra company tax, because some of the money saved by firms might stay in Australia as profit. This made the model balanced and realistic.

Consumption and Housing Impacts

We linked income changes to household spending. Higher-income families tend to save more, so their spending rate was lower. Lower-income and welfare households spend most of their income, so their rate was higher. Housing demand was counted as one-third of total spending, based on national data.

GDP Impact in the Model

We measured GDP changes through three things: less household spending, less business investment, and slower growth caused by losing ICT skills in Australia. We used a 0.07 percent drop per year to show the loss in productivity.

Projection Horizon We Used

We showed the results over 25 years, using five-year steps. This long view helps show both the short-term shock and how the effects grow over time. It reminds us that the cost of offshoring keeps rising as ICT skills and productivity weaken.

Macroeconomic impacts of ICT offshoring

When we talk about the large-scale offshoring of ICT jobs, the real story is not only about cost savings for individual firms. It is about the wider effects on our economy. The modelling shows that the consequences spread across GDP, government budgets, housing markets, retail activity, and even the business sector itself.

GDP losses over time

Gross Domestic Product is one of the clearest measures of national prosperity. Under full offshoring, the loss builds quickly and compounds. By year five, the annual GDP gap is already over 11 billion dollars. By year 25, that gap expands to more than 130 billion dollars each year. Over the whole 25-year horizon, the cumulative shortfall is around 1.24 trillion dollars.

Even in less severe scenarios, the outcome is still damaging. At 90 per cent offshoring, the GDP shortfall reaches about 1.12 trillion dollars. At 80 per cent, the loss is still close to 960 billion dollars. The pattern is clear. Once high-value ICT roles are lost, the economy’s ability to generate growth weakens year after year.

Fiscal pressure on government budgets

Our government finances rely heavily on personal income tax. ICT workers are high earners who contribute a large share of this revenue. When those jobs go offshore, the immediate hit is felt in the budget. At full offshoring, the annual deficit worsens by more than 14 billion dollars within the first five years. By year 25, the shortfall grows to nearly 34 billion dollars each year.

Even in the lower offshoring cases, deficits remain deeper by 27 to 30 billion dollars annually by the end of the projection period. Company tax from higher business profits only offsets a small part of this loss. The net effect is a government budget that becomes structurally weaker, limiting flexibility for future investments in infrastructure, health, and education.

Housing market consequences

High-income households drive a significant share of housing demand. With ICT jobs shifted offshore, annual spending on housing drops by more than 1 billion dollars in the complete offshoring scenario. Over time, that translates into a 30 to 38 billion dollar decline in housing wealth, when future values are taken into account.

These effects concentrate in major cities such as Sydney, Melbourne, and Brisbane, where ICT professionals are clustered. Less demand means slower house price growth, softer rental markets, and weaker construction activity. In a country already carrying high levels of mortgage debt, this adds a layer of fragility to an important part of our economy.

Retail and services under strain

Discretionary spending is another casualty of ICT offshoring. Households that lose high-wage jobs cut back on retail, hospitality, travel, and lifestyle services. The modelling shows annual reductions of around 2.3 billion dollars in the 100 per cent scenario, with only slightly smaller impacts in the 90 and 80 per cent cases.

These figures may look small compared to total national spending, but they are concentrated in urban precincts with a high density of technology workers. For small and medium businesses in those areas, this drop in local demand can be decisive.

Savings and offsets for business

It is true that companies gain from lower wage costs when jobs are shifted offshore. In the 100 per cent offshoring scenario, employer savings reach about 24 billion dollars each year. Around 8 billion dollars of this shows up in higher domestic profits, and about 3.5 billion dollars is reinvested locally. Company tax receipts also rise by about 2 billion dollars a year.

For individual firms, these savings can strengthen competitiveness. However, they do not make up for the broader economic losses. Much of the benefit either leaks offshore or sits as retained earnings rather than flowing into domestic demand. The gap between what businesses gain and what the country loses is significant, and it grows larger as the years pass.

Labour Market, Skills and Innovation Consequences

When we think about offshoring ICT roles, it is easy to focus on the cost savings that companies can achieve. What often gets overlooked are the labour market shifts that affect your workforce, the skills pipeline that feeds your future talent, and the innovation engine that drives your competitiveness. These three areas are where the hidden costs show up most strongly.

How the labour market is reshaped

Large-scale offshoring displaces tens of thousands of high-wage ICT professionals into roles that pay much less or, in many cases, into welfare reliance. Our modelling shows that around 70 per cent of displaced workers would move into jobs paying about AUD 50,000, while roughly 30 per cent would need welfare support. This transition reduces overall productivity. Skilled workers are no longer applying their full expertise, which means the economy gains less value from their training and experience.

There is also the issue of long-term scarring. Workers who leave high-skill ICT roles often face slower career growth, lower lifetime earnings, and fewer opportunities to use their specialised knowledge. That affects not just them but also the organisations that lose access to mature, well-trained professionals. Over time, this creates an economy where advanced skills are underused, while businesses still demand innovation that requires them.

Why our skills pipeline is at risk

If young people and early career professionals see that ICT roles are being moved offshore, they will have less incentive to study or train in the field. This reduces the number of graduates in ICT-related disciplines, weakening our ability to meet the Tech Council of Australia’s projection of up to 1.3 million technology workers needed by 2030.

Education providers also respond to demand signals. If student interest falls, universities and vocational centres may scale back ICT programmes. That creates a feedback loop where fewer students enter ICT, fewer teachers are trained, and fewer domestic professionals are available. In the long run, this erodes our ability to sustain a vibrant digital workforce that supports both private sector innovation and public sector infrastructure.

Innovation that slows down

ICT roles are not limited to maintaining systems. They are critical for building the next generation of solutions in artificial intelligence, cybersecurity, and advanced analytics. When those roles move offshore, our local innovation capacity shrinks. The modelling applied a conservative penalty of 0.07 percentage points to GDP growth each year to capture this effect. In reality, the hit could be larger if we lose the innovation clusters that fuel broader adoption of new technologies.

Innovation thrives in ecosystems where talent, businesses, and institutions interact closely. Moving the talent base offshore reduces the density of these ecosystems in Sydney, Melbourne, and Brisbane. Over time, that makes our local industries slower to adapt and less competitive globally. It also risks creating dependence on offshore providers for critical digital capabilities, leaving us vulnerable if international conditions change.

Why this matters for leadership

For CXOs and founders, the message is clear. The choice to offshore ICT functions is not only about trimming payroll. It directly affects the quality of the labour market you recruit from, the strength of your future talent pipeline, and the innovation capacity that sustains your business. The short-term savings may be real, but the longer-term costs show up in the form of weaker domestic skills, slower innovation, and a loss of competitive advantage for all of us.

Fiscal fragility and housing risks

When we think about the future of our economy, two areas stand out as especially sensitive to the impact of large-scale ICT job offshoring. These are the strength of our fiscal system and the stability of our housing market. Both are central to long-term prosperity, and both face structural risks if a significant share of high-income ICT roles move offshore.

Our reliance on personal income tax

Australia’s tax system leans heavily on personal income tax. Nearly half of Commonwealth revenue comes from the wages of individuals, a far higher share than in most advanced economies. ICT professionals contribute a large portion of this base. With average annual salaries of around AUD 128,000, they add an estimated AUD 17 to 18 billion in personal tax revenue each year.

When these high-earning roles are displaced offshore, the fiscal gap is immediate and lasting. Even if businesses save money and report higher profits, company taxes are far more volatile than personal income taxes. They rise and fall with global markets, while personal income taxes provide a stable stream. By year 25, the annual budget deficit worsens by between AUD 27 and 34 billion depending on the scale of offshoring. This shift leaves government less resilient in the face of shocks and less able to fund essential services.

Housing as a point of fragility

Our housing market is already one of the most leveraged in the world. Household debt stands at more than 180 per cent of income, which means housing demand is closely tied to the spending power of high-income groups. ICT workers are central to this demand, especially in Sydney, Melbourne, Brisbane and Canberra.

The modelling shows that if ICT jobs are offshored at scale, annual housing expenditure falls by around AUD 1 billion. While this may look modest at a national level, it translates into a decline of AUD 30 to 38 billion in capitalised housing wealth. For households, this means weaker price growth, reduced borrowing capacity and greater difficulty in servicing mortgages. For the broader economy, it undermines consumer confidence, slows construction activity and heightens financial system risk.

Why this matters for leaders

For business leaders and policymakers, the message is clear. Large-scale offshoring is not just a labour market issue. It strikes at the foundations of fiscal resilience and household wealth. If the personal tax base erodes and housing markets soften, the economy becomes more exposed to downturns and less able to support growth.

Broader Strategic and Sovereignty Risks

When we look at ICT offshoring, it is not just about jobs or wages. There are wider risks that touch on our national resilience, security, and ability to adapt. These risks are often less visible than GDP or housing data, but they can shape the long-term future of our economy and society.

The challenge of digital sovereignty

If a large share of our ICT functions are managed outside Australia, we lose direct control over critical digital systems. That means our banking, energy, defence, and healthcare sectors could become dependent on offshore providers. In times of geopolitical tension, or even during global supply chain disruptions, our ability to keep essential services running could be weakened.

Digital sovereignty is about having the capability to manage and protect our own systems. Offshoring too much reduces that capability and increases our exposure to risks we cannot fully control.

Cybersecurity vulnerabilities

When ICT operations are handled overseas, sensitive data and systems are placed in environments with different standards, laws, and security practices. Even if contracts and service agreements are tight, there is always a higher risk of breaches and data misuse. For companies, this can mean customer trust is at stake. For governments, it can mean national security is exposed.

Economic dependence and exchange rate risks

Reliance on imported digital services means more spending flows out of Australia. Over time, this makes our digital infrastructure dependent on exchange rate shifts and foreign cost structures. A weaker Australian dollar could raise the cost of these services, creating extra pressure on firms that once viewed offshoring as a cost-saving strategy.

Fragility of our innovation ecosystem

ICT professionals are not just support staff. They are the backbone of new technologies, cybersecurity solutions, and AI adoption. If too many of these roles are sent offshore, our local innovation pipeline shrinks. Fewer start-ups will form, fewer patents will be developed, and our competitiveness in emerging technologies will fall.

Strategic risk for business leaders

For CXOs and founders, the short-term savings from offshoring can look attractive. But there is a real trade-off. By shifting too much offshore, businesses may lose the agility to respond to local customer needs, expose themselves to external shocks, and reduce their ability to innovate at speed. What looks like an efficiency move today can turn into a long-term weakness tomorrow.

Policy Solutions

When we think about the long-term effects of ICT job offshoring, it becomes clear that cost savings for businesses are not enough to protect the wider economy. To safeguard growth, stability, and digital capability, we need a mix of smart policy moves. These solutions focus on keeping critical ICT skills in Australia, building fiscal resilience, protecting housing markets, supporting small businesses, and strengthening digital sovereignty.

Preserving domestic ICT capability

A strong ICT workforce is central to innovation and productivity. If too many jobs move offshore, we risk losing both our talent base and our ability to compete. Our government and businesses can work together on incentives that encourage firms to keep ICT staff onshore. Options include tax credits or grants tied directly to local employment.

Equally important is building the skills pipeline. Expanding university places, vocational programmes, and digital apprenticeships will prepare the next wave of ICT professionals. Migration policy can also play a role, by attracting global ICT talent while still giving priority to developing local expertise.

Strengthening fiscal strategy

Australia relies heavily on personal income tax, which makes the budget vulnerable if high-income ICT jobs disappear. To address this, we may need to broaden the goods and services tax base so that it covers more categories of spending. Another area for action is company taxation. Reviewing concessions and tightening rules against profit shifting would help ensure that corporate savings from offshoring are not lost to overseas tax systems.

A further idea is the creation of a sovereign digital infrastructure fund. Businesses that gain from offshoring could contribute part of their savings into this fund, which would then be used to invest in domestic capability, innovation, and resilience.

Securing housing and financial stability

The housing market is already highly leveraged. Even small drops in high-income demand can shake confidence. To counter this, regulators could introduce stronger macroprudential oversight that factors in structural changes in demand. At the same time, encouraging build-to-rent projects and affordable housing can help stabilise the sector. Supporting regional housing strategies may also reduce pressure on metropolitan markets that are closely tied to ICT jobs.

Supporting retail and services resilience

Small and medium businesses in technology precincts often depend on the steady spending power of ICT professionals. When that base weakens, local demand shrinks quickly. To prevent shocks, governments can design transition programmes. These may include grants, concessional loans, or digital transformation support for small firms. Local economic diversification strategies can also help urban centres spread their risk beyond a single workforce.