Federal Budget gets industry tick of approval

Industry announcements in last week's Federal Budget

Long-term innovation and investment plans laid out in the Federal Government's 2008 Budget have been welcomed by several ICT representatives, although they claim more needs to be done to stimulate strategy and development.

Among the biggest industry announcements in the Budget last week was a $40 billion spending spree on infrastructure, education and health, as well as continued support for broadband.

Other key initiatives include providing $42 million over four years to establish a network of Enterprise Connect Centres connecting businesses with new ideas and technology, as well as $209 million over four years to double the number of Australia post-graduate awards and $326.2 million on Future Fellowships for researchers during the same period.

Specific to ICT, the government announced a further $271 million will be handed out under its Australian Broadband guarantee plan. More controversially, it will spend $125.8 million on introducing ISP level content filtering, a plan that has already drawn criticism from industry groups and ISPs.

The government will also invest $2.3 billion over the next five years to tackle climate change and has earmarked $44 million for the establishment of a National Emissions Trading Scheme. It is unclear how much of this will be targeted at ICT.

Australian Information Industry Associate (AIIA) CEO, Ian Birks, said spending on infrastructure, education and health should garner long-term opportunities for the ICT industry. But he expressed disappointment at the lack of business stimulus across the digital economy.

"The long-term future plans could be positive things for our industry as ICT has a part to play in all of these areas. But these are 2-3 years out," he said. "There's nothing new shorter term to stimulate business."

Concerns have also been raised around the Federal Government's decision to cut the Commercial Ready program. The program was aimed at assisting SMEs to enhance and commercialise advanced research in ICT and biotechnology.

Birks agreed this was a blow for SME development and innovation. Although the government is currently reviewing other initiatives to raise innovation, the lack of adequate support in the short-term was disappointing, he said.

"We understand it [Commercial Ready] wasn't the best solution and there were issues identified in government reports. But if you take it away there's nothing else to replace it today," Birks said. "The government is undertaking a major review in innovation - whether that be IT, education or general business. It's a very broad initiative and we hope something comes out of that specifically targeted at SME innovation. But there's no guarantee."

Birks said the AIIA was participating in the industry review and has called for ICT tax concessions for R&D. "At the moment we're not competitive globally - global companies are not getting great incentives to base their R&D in Australia," he said. "The other levers are supporting and commercialising SME products, services and IP."

Another decision which has provoked censure is changes to the Fringe Benefits Tax (FBT). Under the new budget, the government will limit exemptions on laptops, computers, PDAs and other corporate tools.

Partner at accountancy firm Pitcher Partners, John Brazzale, claimed restricting concessions under the FBT regime meant employees could no longer salary package laptops and pass them onto their child for use at school and at home for their studies. This was inconsistent with other Federal Budget initiatives to provide tax refunds for certain education costs, including the purchase of laptops, he said.

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Brazzale also highlighted the extension of software depreciation from two-and-a-half years to four years as a "confusing" decision. But Birks played down the impact of FBT restrictions and software tax changes.

"It may change the decision timing but I don't see this being a truly big issue longer term," he said.

Australian Computer Society national president, Kumar Parakala, was pleased by the government's view on communications infrastructure, education and innovation investment and said it would have a flow-on effect to the ICT industry.

But he again stressed the need for stronger ICT leadership around strategy and policy.

"There isn't sufficient detail in the budget which articulates the broad strategies required to grow the ICT sector in Australia. Countries that have done very well in ICT are those that define strategies and allocate funding," he said.

"The government is already so pro-IT compared to the previous government that the level of expectations are higher. The private sector has an important role to play - it's not just up to governments. But the government has an important role in setting the policy."

Another ongoing challenge for the ICT industry was developing long-term skills.

AIIA's Birks said the new Future Education fund would go some way to addressing the skills shortage long-term, while an increase in the number of visas handed out to skilled migrants should also help give businesses some short-term reprieve.

But while the budget is an important indicator for how the government perceives ICT, Intermedium head of consulting, Kevin Noonan, said more significant was the raft of ICT reviews currently being undertaken.

The largest of these is a review into the Federal Government's $16 billion ICT procurement spending by former UK Government Treasury Office CEO, Sir Peter Gershon.

Noonan also pointed out there had been a 2 per cent ICT spending cut across all departments which would have a significant affect on government agency budgets.

"The budget is just one piece of a very complex jigsaw for IT funding and a culmination of stage one of the Razor Gang's plans. These reviews are stage two and are about smarter ways of spending and saving," he said.