by Tim Reed, CEO at MYOB
The end of the commodities boom has highlighted a very real issue for our economy. While undoubtedly the minerals industry has done a great deal for Australia, particularly in the post-GFC period, its fortunes masked some fundamental challenges we face in our economy.
As commodity prices languish and demand wanes in our largest minerals market, China, we must face the very real need to broaden the base of our economy. This is not only to protect against the risks inherent in focusing on a single sector, which is at the mercy of international price fluctuations but to also ensure that all Australian businesses have the opportunity to share in the successes of a diverse and vibrant economy.
In order to achieve diversification, however, we must first create the foundations in which new ideas, new technologies and new businesses can thrive. It is highly likely that some of Australia’s next great businesses, with innovations that could potentially transform our economy, are in startup mode today. However, the odds of surviving to realise that opportunity are heavily stacked against them.
Great businesses do not occur in isolation. Instead it is a community of support – and fair competition – with a culture of innovation that nurtures real business growth.
Australia has many opportunities in this regard. We have a growing population with a highly developed sense of entrepreneurialism. Our education system turns out a plentiful supply of talented graduates – many of whom are already taking their first steps into business. Our population density, and the size of our major cities, makes us the perfect proving ground for startup businesses. And we are on the doorstep of many of the world’s emerging and fast growing economies, with an increasing demand for the kinds of products and services we can provide.
However, today’s startups still face many challenges. And one of the most considerable of these is the environment in which they operate. Australia is currently ranked tenth in the world for ‘ease of doing business’ according to the World Bank’s assessment of the regulatory environment, behind other major developed countries like Hong Kong (ranked number 3) Korea (5) the US (7), and the UK (8). Across the Tasman, New Zealand is ranked second only to Singapore on this measure, and it leads the world on the ease of starting a business (Australia is seventh).
To create an environment where startups can thrive, our Government can do much more to reduce the compliance burden – often felt disproportionately by SMEs. MYOB’s research has shown small businesses are spending an average of 84.1 hours a year on taxation compliance, equal to almost $13.7 billion a year. In New Zealand the tax regime is much simpler, and not surprisingly the cost of compliance for each business is less than half what it is in Australia.
But providing the ideal business environment is not only the responsibility of the Federal Government. It happens at the State and even community level as well. The success of Silicon Valley, for example, didn’t just occur because a few visionary leaders in the technology sector established operations in a small community in California. It also supplied – and still does – the tax support, the access to investment, a pipeline of graduate talent and a dynamic urban environment that created the foundations for an explosion of successful startups. That kind of environment is possible to engineer, or at the very least encourage, if state and city leaders, the finance industry and education sector are prepared to work with industry to identify opportunities and respond quickly to their needs. And imagine the difference that could make for a city like Melbourne, Adelaide or even Newcastle.
As the leader of one of Australia’s software developers I am a firm believer in the potential of the technology sector as one of Australia’s next great industries. For startups today, it also represents one of the greatest areas of opportunity. A 2013 report, commissioned by PWC, found that the Australian technology startup sector has the potential to contribute $109 billion to the Australian economy – 4 percent of GDP – and over 500, 000 jobs by 2033.
But a truly diverse economy will provide opportunities for startups in many areas. Our service sector is one of our fastest growing, our tourism industry is benefiting from rising visitation from many emerging markets and the falling dollar has provided a welcome shot in the arm for local manufacturers.
What I can guarantee will become our greatest export in the future is our intellectual capital – driven by Australian innovation, know-how and entrepreneurialism – provided we are all prepared to invest in an environment that makes it possible for the startups of today to become the leaders of tomorrow.