Scott Morrisons’s 2017 federal budget delivered a number of benefits for Australia’s 2.1 million small businesses, including the extension of the $20,000 instant asset write-off for another 12 months, and the $300 million incentive for state governments to cut red tape and use technology to provide most effective, efficient regulation
With the budget now out in the open this is intense debate within industries about whether the measures are enough in terms of providing platforms for growth, support for accessing new markets, as well as confronting the realities of modern business including the march of global competition.
Speaking at a Business Insider Federal Budget roundtable, moderated by editor-in-chief Paul Colgan and co-hosted by Xero, panelists from PayPal Australia, Salesforce APAC, OFX, small business consultancy Basic Bananas and Xero discussed the budget outcomes and what it means to small business.
Here’s what they had to say.
“Last year the focus was can we create culture where people want to come to… this year I am interested in seeing how can we help companies really achieve scale”, said Robert Wickham, regional VP of Innovation & Digital Transformation at Salesforce APAC.
“To me this comes down… how can we get more customers, how can we get more capacity to scale those customers and how can we get more access to funding to fuel our growth.
“Are there settings [in the budget] to allow businesses to go global, to do more innovative things, to improve our access to technologies, to improve on product market fit — very little was done there.
“The R&D tax incentive was not really addressed, which the overall startup ecosystem has flagged as a missed opportunity and a sense of anxiety, [and] the question that is unanswered in my mind is whether or not the tax break — the $20,000 writeoff — if technology investments qualify… and if the answer to that is no, then I think that’s also a missed opportunity.
“The other component… is skills and talent. How do you get the best talent, whether that’s in Australia or globally, to be part of your business to fuel that growth?
He said the changes to the old 457 skilled migration scheme were a source of anxiety.
“I am the beneficiary of the 457. I came here five years ago from Boston… and one of the decision points we were considering when we moving here was housing affordability and cost of living. So that still is a major thing that needs to be addressed as you attract the world’s best talent.”
Real-time training for the modern economy
Christo Hall, founder of Basic Bananas and serial entrepreneur, said that support for the small business sector, whether through funding or education, was also lacking in the budget.
“Small businesses are just trying to make ends meet initially… to try and get the thing off the ground, and things start happening like they use contractors instead of employees… and they outsource work [overseas] rather than using someone here.”
He said it would be more helpful if the government supplied more support in terms of internet connection, training for available platforms, and other productivity efficiencies.
Anneliese Urquhart, director of small business at Xero agreed, saying small businesses were “typically undertooled.”
“They usually see efficiency gains by better utilisation of software, they’re not aware of the tools available to them. Compliance is also a really big challenge still, it’s very difficult in terms of scaling.”
She said more cutting of the red tape and access to funding, and capital was required on top of the proposed asset write-off and reduction in company tax rates.
“Realistically I think there is more opportunities and it’s a great step in the right direction… but I think if you asked a small business owner, who was looking at scaling a tech startup, if the changes went far enough, they would probably say no.”
Preparing for globalisation
Overall the lack of discussion around innovation and positioning of globalisation in this year’s budget was the biggest grievance across the board.
“Listening to Morrison’s budget speech, in his second paragraph he mentioned globalisation and technological change — not as positives but as things that could cause negative consequences for people,” said Simon Edwards, director of government relations at PayPal Australia. “[The government is] very conscious of what the general public are thinking and feeling right now.”
He noted it was one of the longest budget speeches in duration of recent times and that Morrison was directing it to select audiences.
“That globalisation and technological part wasn’t to the tech sector, it wasn’t to the business sector, it was to the general public who are fearful of the world which is changing around them.
“In a narrative sense, I think what the government is trying to get through is there are these inevitabilities that the government can’t stop, it’s the private sector.”
He said the regulatory sandbox laid out in the budget is recognition by the government that more needs to be done to help business take the risk of trying new products.
Wickham agreed. “When you look at an ecosystem you’ve got two parts, right? You’ve got the soil and you’ve got the weather. A lot of the settings are about how you fertilise the soil, and the weather so far is cloudy with a few scattered showers. And there’s no narrative about where is the sunshine.”
Meanwhile Michael Judge, head of corporate dealing ANZ at OFX warned that small business, and the stakeholders surrounding them, shouldn’t discount the importance of sentiment and confidence.
“I fully appreciate the small businesses need cashflow. They’re going to be confident when their tills are full, but at the end of the day they’re not going to be deploying or reinvesting those returns, their not gong to be mobilising their capital, there’s not going to be this entrepreneurial environment which is harvested in the absence of that broader overall messaging from the government.
“As soon as businesses start to become skeptical about things… like automation, I think that’s where you get a disconnect from a consumer perspective. The reason why you see that development, and evolution towards things which the government can’t control, I think that is an acknowledgement that the consumer is drafting those things, and the businesses need to embrace what it is already happening instead of being skeptical that we’re going to have to react.
“I think the government, certainty in this budget, has a relatively optimistic picture,” saying the budget was designed to be future-proofing the economy as opposed to falling back on traditional infrastructure projects.
“There has been too much government spending. At the end of the day it is an asset equation as to where you’re going to be making money and future proofing for the next generations.”
Edwards concluded: “What is most interesting to me is what comes next.
“I fear it is going to become a bit of an auction, of how much do we put into health, education, welfare… rather than addressing the more fundamental questions of how the world has changed. And as a country we have to respond to that.
“A lot of this is going to happen organically, and there’s not a lot that government can do to change that.”