IT sector won't be spared from Budget "pain"

The Coalition has characterised the cutbacks in the new Budget as bringing “pain with a purpose”, and the IT sector looks set to share in that pain.

Sweeping Budget cuts will cut off important sources of aid to the sector, according to Simon Coulton, national head of technology and media for Grant Thornton Australia.

“The government has overlooked investment in the ICT sector by not providing adequate incentives that encourage businesses to invest in innovation,” he said. “Instead, the industry faces cuts to key sources of assistance, including the abolition of: Commercialisation Australia, Innovation Investment Fund, Industry Innovation Precincts, Enterprise Connect and Australian Renewable Energy Agency.”

The 2014 Budget also reduces the R&D tax offset by 1.5% from the start of the new financial year, “sending a clear message that innovation is not a priority”, Colton said. He predicted that more companies will take their IP offshore where they can expect more supportive business conditions.

As part of the new Budget, the Abbott government has also announced that it will cut off funding to National ICT Australia (NICTA) after FY16. The Department of Communications and the Australian Research Council will each contribute $21.4 million in funding for the next two financial years, then the organisation is expected to move to a self-funding model.

NICTA was established in 2002 to increase the scale and quality of Australian ICT R&D. It focuses on building technology-focused start-ups and conducting advanced IT research. Announcing the move, the government asserted that NICTA had always been expected to draw an increasing proportion of its funding from the private sector.

But NICTA boss Hugh Durrant-Whyte has been publicly critical of the decision. In an interview with the Australian Financial Review, he asserted that NICTA will not be able to continue research with only private sector funding.

“Even if, in the end, half of our funding was external from sale of companies, licensing and things like that, you still have to underpin the core research that makes that possible,” he said. “There’s no model in the world in which a research organisation is entirely externally funded.”

Australian Information Industry Association (AIIA) CEO Suzanne Campbell was diplomatically critical of some of the Budget decisions.

“In relation to innovation, while applauding the creation of the world’s largest medical research endowment fund, the AIIA is seeking to better understand how the establishment of the Entrepreneurs’ Infrastructure Programme will redress the abolition of programmes including Commercialisation Australia, Enterprise Connect, Industry Innovation Precincts and Industry Innovation Funds, to ensure that Australia is well positioned to create sustainable prosperity and meet emerging global competition,” she said in a statement.

ABC Online notes that the government has also taken $116 million out of the CSIRO’s operations budget over the next four years, and reduced funding for the Co-operative Research Centres (CRC) project by $80 million over the same period.

The Budget isn’t all cuts - it does include funding for some new IT projects. This includes $100 million for a project to address mobile blackspots in outer metropolitan, regional and remote Australia, focusing on major transport routes, small communities and areas prone to natural disasters.

It allocates $20.9 billion in equity funding for the NBN project for the period from 2014-15 to 2017-18, and confirms that the government’s total capital investment in the NBN project will be capped at $29.5 billion. The Budget also includes $140 million to support the continued operation of the PCEHR e-health record system.

IT News has a round-up of smaller IT projects receiving funding in the Budget. These include $12.1 million over four years, for upgrading the Australian Financial Security Authority’s core IT systems, $10 million for a four-year project aimed at improving child safety online and $3.8 million over four years to enhance the Higher Education Management System (HEMS).

Image courtesy of 401(K) 2012 under CC