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News & Analysis

The budget is a dud for tech and startups

- May 12, 2021 4 MIN READ
Treasury mandarins deliver the tech sector's 2021 budget allocation. Photo: AdobeStock
Scottish writer Sir Walter Scott wrote: “The hour’s come and the man” and 180 years later, the phrase that launched a million memes could equally apply to the tech industry.

Except in last night’s federal budget, in tech’s finest hour, it could barely be seen in treasurer Josh Frydenberg’s announcements.

I’ll be blunt: when the s^!t hit the fan 12 months ago, tech stepped up.

The Australian economy found a way to prosper amid the 2020 coronavirus pandemic thanks to the groundwork laid by the startup/tech sector.

The man Scott Morrison toppled as prime minister, Malcolm Turnbull, should get some of that credit for the national innovation and science agenda he launched back in 2015.

In recent years, local tech startups built digital life rafts not knowing the ship would one day sink. When Covid turned up to play iceberg to the economy’s Titanic, those innovations were reason we didn’t end up like Leonardo di Caprio slipping away from Kate Winslet in the movie’s closing scenes.

Australia rapidly transformed and embraced digitisation and became remarkably resilient in the process. Years of digital transformation happened in a matter of months because a bunch of visionary people who’d been working on this stuff for years, if not decades, had the tools there for us all to pick up and use.

The budget didn’t need to announce street parades for the digital innovators who made it all possible, but it could have invested a lot more in continuing the momentum generated during 2020’s pandemic in order to bring the nation up to speed.

Instead, Frydenberg and Morrison squibbed it. At best, the tech sector got a few scraps from the budget table – a little over $110 million a year in an economy worth $2 trillion a year.

That’s 0.0011% of GDP for digital innovation.

How did I come up with that number? Well the $1.2 billion Digital Economy Strategy announced last week as part of the budget measures stretches out over six years, rather than the usual four years of forward estimates.

An aside: that whole Strategy’s strategy is more focused on digital adoption rather than digital innovation, which is another lost opportunity. 

Of that $1.2 billion, $500 million is for the Modernising Business Registers Program; $200.1 million to enhance the myGov service; and $301.8 million for a “next generation” My Health Record system.

That’s right, nearly half of the money is capex to upgrade the government’s own digital capabilities.

That leaves $700 million.

Let’s put that figure in perspective.

The NSW government is spending $828 million on a rebuild of the Sydney Football Stadium.

The Federal government is spending $500 million on upgrading the Australian War Memorial.

An extra $4.5 billion is going upgrading the NBN Co.

The budget even has $464.7 million allocated over two years in increased funding for onshore immigration detention and expansion of the Christmas Island detention centre. Yep, we’re spending almost as much on locking up a handful of asylum seekers as we’re investing in the digital economy and innovation.

The total allocation towards artificial intelligence is $124.1 million, around 60% of the cost of upgrading the MyGov site.

To put that another way, AI gets around $4.50 per Australian while they spend $7.70 on behalf of every Aussie on fixing the national website.

The government is spending more $225 million, on excise tax relief for small-scale alcohol brewers and distillers.

The rest of the numbers are here, but really, they’re piddling amounts.

The $18.8 million cost of the 30% refundable Digital Games Tax Offset for local games developers is less than the $30 million the government spent to buy a 12-hectare block of land worth $3 million next to Western Sydney Airport.

Even as a total package, the $1.2 billion strategy is less than 1% of the FY2021 budget deficit of $161 billion and next financial year’s $100 billion deficit.

Even key issues close to the heart of the startup sector, such as Employee Share Schemes (ESS), were tinkered with, rather than reformed.

And everything else the sector actually wanted, such as relaxing the skilled migration visa requirements, quarterly R&D refunds and an R&D tax incentives more aligned with software development, we all ignored. 

There were some wins, such as the $206 million in tax concessions from a Patent Box regime with a low 17% corporate tax rate to boost local ownership of medtech and biotech patents, but compared to the ambitions in previous budgets, the prime minister’s ongoing obsession with tradies and a Bunnings-led economic recovery was on clear display in the 2021 federal budget.

Today my inbox is full of commentary from startup founders, sent by the well-paid PR companies, most saying nice, polite and grateful things about the budget. I’m genuinely surprised by how supine many of them are, especially when I think about the number of times Western Australia mining billionaires made angry calls to drag down governments when their fortunes were threatened.

Prime minister Morrison loves donning the hi-vis to hang out with working blokes for a photo op. Perhaps the tech sector needs to swing by Lowes for some fluoro orange and lime swag if it wants to be seen in the budget.

 

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