We’ve seen the short-term pain, now we need the long-term gain
13 May 2014
The release today of the Government’s 2014-15 federal budget has confirmed plans to implement major short-term savings through the abolition of key innovation industry programmes, without there being a complete picture of how businesses will be encouraged to transition into a more innovative and internationally competitive economy in the future, says the Australian Private Equity & Venture Capital Association Limited (AVCAL).
“Everyone was expecting to see plenty of short-term pain for businesses in this budget – and that’s exactly what we got,” said AVCAL’s Chief Executive, Yasser El-Ansary.
“But what we were also expecting to see tonight was a plan which set out the longer-term vision for what the Australian economy will look like in the next five or ten years – the short-term strategy of deep cuts to expenditure only makes sense when you can line it up against a picture of where we are trying to get to,” he added.
Support for innovation investment
The Government has confirmed in this budget plans to abolish a number of key programmes, including the highly successful 15-year old Innovation Investment Fund, as well as cuts to the research and development tax system.
“Abolishing the Innovation Investment Fund represents a major set-back to Australia’s capacity to foster a stronger venture capital industry that can drive businesses in the new corridors of economic growth for our future,” according to Mr El-Ansary.
“The establishment of a new Medical Research Future Fund could support greater investment into biotechnology into the future, but it has to be designed in a way that encompasses a focus on commercialisation as well as pure research,” he added.
“The new Entrepreneurs’ Infrastructure Programme will have to be framed around backing Australian businesses with world-class ideas that can be supported by private sector investment from the venture capital industry,” said Mr El-Ansary.
Lifting our international competitiveness
“Business was looking at this budget as an opportunity to kick-start a renewed focus on lifting Australia’s competitive position in the international race for capital and skills, and while a cut to the corporate income tax rate is a step in the right direction, there is a lot more that needs to be done,” said Mr El-Ansary.
In the World Economic Forum’s Global Competitiveness Index, Australia currently ranks number 15 in the group of 34 OECD countries. AVCAL has advocated for some time for changes to be made to tax settings that would help to make Australia a more attractive destination for domestic and offshore investors.
AVCAL will turn its attention over coming weeks towards pressing the Government to map out a plan for how it will encourage greater investment into business and innovation in Australia, through the National Industry Investment and Competiveness Agenda, which is due to be released in the coming months.
A more detailed analysis of the 2014-15 federal budget can be accessed here.
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Author: Adrian O’Shannessy, Director, Greenwoods & Herbert Smith Freehills
Author: Dr Kar Mei Tang, Head of Policy and Research, AVCAL