Denham Sadler
May 10, 2018

Budget ‘silent’ on tech agenda

Budget 2018

Budget ‘silent’ on tech agenda

Ted Pretty: A disappointing budget for the local tech sector

This week’s federal budget confirmed that government had rejected its own innovation agenda, while changes to the R&D scheme may force early-stage tech companies to move overseas, according to Covata chief executive Ted Pretty.

Mr Pretty, who served as a senior advisor at Macquarie Group and managing director of technology innovation at Telstra before heading up the data security firm, said the latest budget provided little new money to the tech and innovation sector, and would add another layer of red-tape that would hinder growth.

“From an innovation and science perspective it’s clear that the government agenda was to save billions of dollars, which is admirable in itself, but then when they announce these new schemes it’s like they’re saving billions of dollars and handing over 50c pieces in return,” Mr Pretty told InnovationAus.com.

“It just looks like the old stuff has been repackaged again and old funding commitments previously announced have been relabelled. It’s hard to see what’s happened to the original ideas boom and innovation agenda,” he said.

“That was launched with much fanfare, but it just seems to have faded. All of the stuff with the tech boom, I can’t see how the budget gets us there.”

The Turnbull government’s focus has now shifted far away from supporting the growing tech sector in Australia, he said.

“There needs to be a rethink between the various jobs and innovation agendas because a lot of what has popped out of this budget says where the priorities are and they’re not in support of tech and cyber, despite what they say,” Mr Pretty said.

“Where are the people promoting the ideas boom and new agenda now? They’re deathly silent. There is a vacuum in the market for some plain speaking.”

He said that federal budgets should provide consistency and cohesion, and ensure that programs for targeted sectors be adequately funded, but this week’s installment does neither.

“With this approach to a budget you cannot rely on the programs to be consistently funded even for the electoral period because annually they repurpose money and reclassify it.

“This is about certainty and stability. No-one is saying that we need to be given more handouts, but we are saying that they need to provide efficient, light-handed compliance and certainty in terms of policy. That’s all. Give us those things and we’re fine,” he said.

Mr Pretty pointed to changes to the research and development tax incentive and the corresponding crackdown on claims, along with a lack of funding for cyber security, as factors that may force local tech companies to move overseas.

“If you’re simply going to make it harder to do business and more uncertain for businesses, then you’ll incentivise people to look to other markets," Mr Pretty said.

"Even in our own case there are plenty of offshore governments targeting companies to go and establish their businesses over there."

“Give us certainty and consistency and then think about the money you’re spending and wasting on the creation of new innovation agendas and new boards and programs, and focus on taking the existing programs and better fund them.”

The most important budget item for the tech sector were significant changes to the R&D scheme, the most popular government program among tech companies and startups.

The government said it plans to save $2.4 billion from these changes, and will also strengthen anti-avoidance laws and give the ATO more powers to hunt down those misusing the scheme.

But while the main changes will mostly impact larger companies trying to capitalise on the scheme, it may also make things tough for smaller tech firms, Mr Pretty said.

“The specific agenda there was to save $2 billion, which again in principle that’s admirable because for some time large corporations used the benefit for production activities, but I’m worried about the impact for small businesses.

“We’re already drowning with red-tape and oversight, and now they’re giving the green light to the ATO to go tougher on R&D. That will drown us in more paperwork,” he said.

“It makes you wonder whether the real impact, particularly this year and next year, will be extended delays in R&D refunds.”

The budget also included little in the way of funding or support for the cyber security industry, apart from the establishment of a new cyber security operations centre in Canberra to protect the parliamentary computing network.

Earlier this year, government-funded body AustCyber was given just $3 million for industry-led cyber security projects, but Mr Pretty said the organisation has already received applications worth more than $50 million.

“I don’t see how they can do the best job if they’re thwarted or limited in their efforts by a lack of funding. It just looks like the old stuff has been repackaged again and old funding commitments previously announced have been relabelled,” he said.

The savings clawed back from the R&D changes won’t be reinvested in the tech sector either, Mr Pretty said. Even big ticket budget items like the Great Barrier Reef package and genomics mission won’t receive any new funding.

“When they announce these new schemes it’s like they’re saving billions of dollars and then handing out 50c pieces in return. Even the big ticket items like the genomics package, that funding comes out of the original research commitments made some time ago,” he said.

“Even the Great Barrier Reef funding is coming out of the old Great Barrier Reef funding. It leaves you wondering if there’s actually any real change.”

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