Budget to have mixed impact on ICT sector

The 2017 federal government Budget contains pluses and minuses for the ICT sector.

The latest federal Budget allocates funding for a range of initiatives aimed at addressing the ongoing skills shortage and advancing Australia’s transition towards a digital economy. But a further squeeze on companies employing skilled foreign workers could place more pressure on the ICT sector in the short term.

Digital transformation

The Budget includes a series of investments in the government’s digital transformation agenda. These include $10.7 million towards establishing a Cyber Security Advisory function within the Digital Transformation Agency, tasked with helping federal government agencies build and procure security services.

The Budget also allocates $22.7 million in the coming financial year for the next stage of the development of the GovPass unified authentication tool for online government services, as well as $374.2 million over the next two years to enhance the My Health Record project.

Funding of $350 million over the next three years will be provided for projects to modernise the Australian Public Service, including $130 million towards establishing Data Integration Partnership Australia, which will aim to remove data silos across government and design more effective government services using enhanced data analytics.

Gartner Research Director Dean Lacheca said these initiatives show a commitment to modernising the business of government.

“It’s good to see the government continuing to fund its commitment to the innovative use of technology and data to drive digital transformation within the government and the rapid delivery of lower cost, quality government services,” he said.

“Specifically, the focus on shared whole-of-government platforms, the attempt to break down some of the data silos that plague governments around the world through the ‘Tell Us Once’ style of system and federated identity management framework are all good steps towards digital government maturity by the Australian government. The challenge now is to deliver against these commitments.”

Skilling Australians for the future

In the wake of the recent decision to abolish the 457 temporary skilled work visa and replace it with two new categories with a tighter list of eligible occupations, the new Budget also includes a plan to charge businesses employing foreign workers on skilled visas an annual levy to support a new $1.5 billion National Partnerships Skilling Australians Fund.

Under the scheme, businesses will be required to make an upfront annual payment of $1200 (for companies with an annual turnover of under $10 million) or $1800 (for companies with a turnover above $10 million) per visa per year for each employee on a temporary skill shortage visa.

Businesses will also be required to pay $3000 and $5000 respectively for employees being sponsored for a permanent Employer Nomination Scheme or Regional Sponsored Migration Scheme visa.

The new fund will give priority to apprenticeships and traineeships in occupations in high demand, particularly those currently relying strongly on skilled foreign worker visas. In light of the controversial decision to reduce the HECS repayment threshold, it appears to be an attempt to encourage more young Australians to pursue alternative paths rather than university towards high-skilled jobs.

But Queensland Treasurer Curtis Pitt noted that the Skilling Australians Fund is just a watered-down replacement of the previous National Partnership on Skills Reform.

“The new arrangement will be funded by a levy on businesses employing foreign workers, so actual funding to the states will depend on that revenue and states will also be required to match federal funding,” he said.

“Based on the Budget Papers, in 2017–18 we will receive $40 million less than this year when it comes to skills funding.”

In a statement, AIIA CEO Rob Fitzpatrick added that the annual foreign worker levy “does raise concerns with respect to additional hiring and human resources costs for companies”. He noted, “There is a critical shortage of qualified people in jobs demanding cyber security, cloud and data and analytics skills, and companies that rely heavily on these skills will have a greater financial burden, particularly small and medium-sized enterprises.”

While the Skilling Australians Fund is a positive sign that there is a focus on high-demand occupations and industries and sectors of future growth, Fitzpatrick said the key will be how well the scheme is executed.

“Forty-four per cent or 5.1 million current Australian jobs are at high risk of being affected by computerisation and technology over the next 20 years, so this will be critical to ensuring Australia’s long-term global competitiveness. Consulting with industry on where the focus needs to be in skills development, however, is imperative,” he said.

Other initiatives aimed at improving the supply of skilled Australian workers include a $24 million Rural and Regional Enterprise Scholarships program that will prioritise fields including STEM and health.

Australian Computer Society President Anthony Wong broadly praised the education initiatives in the Budget as a step forward for Australia’s transition to a digital and knowledge economy.

“The ACS is supportive of the government’s introduction of needs-based funding for Australian schools, as outlined in the Quality Schools reforms package, which includes $242.3 billion in recurrent funding to schools over the next decade. We also welcome the new Gonski-led Review to Achieve Educational Excellence in Australian Schools to provide advice on how this funding should be used to improve student achievement and performance,” he said.

“However, at a time when the performance of Australian students in science and maths is declining, the ACS supports a stronger focus on building digital skills and digital literacy in Australian classrooms. This must be a critical economic and policy priority,” he said, noting that STEM is associated with 75% of the fastest growing occupations, innovations and wage premiums.

“Currently, 2.5 million Australians in non-ICT job roles require ICT skills. As a longstanding advocate in this space, the ACS has actively raised concerns about the critical need to address Australia’s ICT skills shortages to meet future skills demand. This is alongside the need to boost ICT enrolments and completions where currently graduates represent only 1% of the ICT workforce.”

A boost for start-ups and manufacturers

The Budget also includes proposed regulatory changes that promise to facilitate the expansion of start-ups and digital businesses.

These include changes to make it easier for start-ups and small businesses to raise capital by removing the requirement for companies to be publicly listed to make use of crowd-sourced equity funding.

From 1 July purchases of digital currency such as Bitcoin will also no longer be subject to GST. “Removing double taxation on digital currencies will remove an obstacle for the Fintech sector to grow in Australia,” the AIIA said in a statement.

Meanwhile, changes to the current R&D Tax Incentive scheme that had been recommended in the recent Finkel-Ferris-Fraser Review have not yet been introduced.

“While innovation companies will be relieved that the R&D Tax Incentive has not been cut back, there will be an overall feeling of disappointment that no substantial improvements to supporting innovation have been made as well as concerns that a future response to the Finkel-Ferris-Fraser Review may still bring bad news,” RSM Australia Partner for R&D Stephen Carroll commented.

The struggling manufacturing sector will also get a boost with the Budget’s more than $100 million in funding to improve innovation, skills and employment in advanced manufacturing, including a $47.5 million addition to the growth fund aiming to help the manufacturing industry adjust to the wind-down of car manufacturing.

The expanded scheme will provide manufacturers in South Australia and Victoria with matching funds for up to a third of the cost of projects to upgrade their businesses for advanced manufacturing.

In addition, $20 million will be provided under the Cooperative Research Centre Projects initiative for large-scale advanced manufacturing research projects.

“We welcome strong new investment in researching and developing new advanced manufacturing technology, including a $20 million injection into the important Cooperative Research Centres program,” Science and Technology Australia CEO Kylie Walker said.

“But it’s disappointing that after recent cuts and a two-year salary freeze, our biggest national research agency, CSIRO, will suffer a decrease over four years of $13.6 million. Though small, this represents a continued erosion of their budget in real terms. We’re also disappointed that the Australian Research Council (ARC) funding won’t keep pace with inflation, meaning grant allocations will fall in real terms.”

Walker also expressed disappointment that the Budget included no allocations for capital expenditure on major national research infrastructure. “We hope the National Research Infrastructure Roadmap will be released soon, along with plans to achieve its recommendations,” she said.

The Budget also includes a $7 million increase for the Business Research and Innovation Initiative and $26.1 million for astronomy research and innovation via a strategic partnership with the European Southern Observatory.

Image courtesy of 401(K) 2012 under CC

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