Economy

Cap on R&D offset holds back investment… No uni places… Yahoo search marketing… Now the private equity party hangover… Web traffic measures change… Boomer dollars go begging… Labor targets grocery prices…

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R&D tax offset cap is holding back investment

SMEs could be holding research and development spending below a $1 million cap to qualify for the Federal Government’s R&D tax offset.

Business focus groups told the authors of a new Federal Government report on R&D tax concessions that some businesses in the industry want to spend more on R&D but the $1 million “sudden death” cap on spending for which tax offsets can be claimed meant it was not economical for them to do so.

The R&D tax offset allows businesses in a tax loss situation with less than $5 million turnover – and which spend less than $1 million on R&D – to claim an upfront tax rebate. If they exceed the cap by even just one dollar, they are no longer eligible to claim anything under the offset.

The report recommends that the Government consider introducing a “soft cap” under which the availability of the offset would be phased out as R&D spending exceeds $1 million.

The new Federal Government report also found that a few “bad apples” have sought to rort the offset by claiming for spending on research conducted by related entities that did not actually take place.

The tax office is conducting an investigation into possible abuses, but the report indicates that it is unlikely major changes to the offset will be required facilitate better compliance.

Releasing the report, Industry Minister Ian Macfarlane said the offset had improved R&D spending by about $310 million ayear and prompted an extra 1000 SMEs to invest in R&D.

– Mike Preston

 

Uni shortfall leaves employment skills gap

A failure to meet domestic demand for university places over the past five years has been a key factor behind the skills shortage, a new report has revealed.

Australian students have missed out on places as universities have focused their attention on attracting fee-paying overseas students, according to the report by Monash University academics Bob Birrell, Daniel Edwards and Ian Dobson.

Their study shows domestic student enrolments increased by 8759 between 2001 and 2005, well behind the 41,229 increase in overseas students.

This would be fine if demand for places by Australian students was being fully met, but Birrell says this is not the case.

“There is clearly unmet demand in Australia; [previous measures] of domestic demand have been far too tight and when you incorporate a more reasonable measure it nearly doubles the numbers of students who are missing out,” Birrell says.

The clear effect of this shortfall, he says, is a lack of skilled labour in Australia.

“Australia’s training record for domestic students is woeful and completely out of sync with employer demand for professionally trained persons. There is a clear cut need to expand universities so that the booming demand for professionally trained people, especially in fields like engineering and accounting, can be met,” Birrell says.

The information and communication technology sector has seen a fall off in graduates over the last six years despite surging employer demand, according to Australian Information Industry Association chief executive Sheryl Moon.

“We’re at the stage now where vendor companies in the ICT sector are having to turn down business because they don’t have the staff they need to do the work, and of course that has an impact on clients who can’t get the services they need as well, so it has a broad effect,” Moon says.

– Mike Preston

 

New Yahoo! search marketing

Yahoo! Search Marketing launched its new search engine advertising system, code named Project Panama, in Australia yesterday, as paid search marketing booms. It was the fastest growing segment in the online ad market last year, up 105.7% to $254.5 million according to research company Frost & Sullivan.

Project Panama introduces some big changes, including:

  • A geographic targeting tool that breaks Australian and New Zealand into more than 40 regions.
  • Faster activation services.
  • Enables advertisers to create variants and will display the variants that get more clicks more frequently.
  • The highest bidder’s ad will not always be ranked highest.

Existing advertisers will be migrated during the next few weeks, and newcomers added later this month, but full functionality will not be available until the end of the year.

– Jacqui Walker

 

Heady days over for private equity party?

Private equity has scaled amazing heights but its headiest days could well be over, The Economist has warned.

This month several high profile deals in the US, Britain and Australia have fallen over. The prospect of dwindling returns makes buy-out firms reluctant to club together to buy the big companies they covet. Banks are also growing wary of offering their own capital as bridge finance.

If the good days are over, watch out. Banks have raked in profits from the buy-out industry’s appetite for loans and deal making advice. And the sharemarket has climbed on takeover fever.

– Amanda Gome

 

New way to measure traffic

Leading web ratings service Nielsen/NetRatings is about to begin using time spent rather than page views as its primary measurement, reports ITWire.

Page views are increasingly considered a less reliable signal of viewer engagement because of new Web 2.0 technologies and publishing models. It’s no longer necessary for a full re-fresh of the page (a page view) to deliver user-generated content.

According to Nielsen/NetRatings’ latest figures, the top five categories ranked by time are email, instant messaging, member communities, online games and current events/global news.

ITWire says the change would appear to favour large sites such as Yahoo that have already adopted AJAX to update pages without user intervention, and those like YouTube that deliver streaming video, while disadvantaging “in and out” sites such as Google’s search engine and most news sites, where page views are a much better indication of usage. One visitor may be able to digest an article in 10 seconds, while another may take a few minutes to read it.

– Jacqui Walker

 

Snaring the boomer dollar

Baby boomers are the most wealthy sector of the marketplace with the most discretionary dollars. But they are largely ignored by marketers who are not creating campaigns with the boomers in mind.

“No one spends more per person than people aged 55-64,” says Gill Walker, managing director of Evergreen Marketing and Communications. Only the boomers and seniors are showing any growth when it comes to discretionary spending in the next few years, she told a recent Evolve 07 seminar.

She says marketers are failing to grasp the opportunity because they believe it’s too hard, only young people are aspirational, and that older consumers are brand loyal. Plus how do you appeal to older people?

Gill gives the example of Marks & Spencer, which used an older model Twiggy in an ad campaign and sold 50,000 cardigans in two weeks. It also made changes in store, like increasing the size of the text on the product tags and reformatting stores to create smaller spaces.

Her tips to snare the baby boomer?

  • Don’t call them baby boomers. They don’t like it.
  • Avoid stereotypes: most grandmothers are not grey haired.
  • Positive imagery.
  • Use humor but make it subtle; clever put downs don’t work.
  • Use deeper male voices.
  • Make things easy to hear – don’t use a sound track and a voice at the same time.
  • Use music that engenders a message from their childhood.
  • Use a mix of genders – not just “couples from the beach”.

 

Labor promises retail grocery competition review

The key industry group for independent retail grocers has welcomed Labor leader Kevin Rudd’s promise to conduct a review into grocery prices.

A Labor government would direct the Australian Competition and Consumer Commission to conduct a six month inquiry into competition and prices in the retail grocery market, Rudd told a community forum in Melbourne this morning.

“It is simply a matter of getting to the bottom of what is happening in the grocery market,” Rudd told ABC radio. “The inquiry will consider whether there are any problems with abuse of market power, collusion or unconscionable conduct.”

The ACCC would also maintain a website to publish a periodic pricing snapshot of selected grocery items at supermarkets across the country to “exert greater competitive pressure” under the Labor proposal.

Earlier this month the National Association of Retail Grocers of Australia (NARGA), a lobby group for independent grocers, produced a report showing that grocery market concentration in Australia is the highest in the world, with Woolworths and Coles having a combined total of almost 80%.

This market dominance allows the big players to put the squeeze on suppliers to independent grocers, NARGA claims.

NARGA chief executive Ken Henrick today welcomed Rudd’s announcement. “Anything that draws attention to the huge market dominance of Woolies and Coles is good thing, it will shine a light on what they are doing and may bring it out into the general public.”

– Mike Preston

 

Costs to rise for nightclubs

Night club owners will have to pay a lot more for the right to have recorded music played on their premises. The Copyright Tribunal said yesterday the fee of 7c per person paid by night clubs would rise to $1.05. Night club owners might have to put up their fees to cover the increase in costs.

 

Economy round-up

Consumer sentiment in Australia remains at close to record levels despite a small 0.6% decline in July, according to the Westpac-Melbourne Institute index of consumer sentiment released today.

The number of households surveyed who expected family finances to drop over the next 12 months dropped by 3.7% and a decline in economic conditions by 3%, but there was a 3.2% rise in the number who felt that now is a good time to purchase a major consumer item.

The Australian dollar continues to hover around US86c. At 12.30 pm it was trading at US85.97c, up on yesterday’s US85.84c Sydney close. At the same time the S&P/ASX 200 is down 0.6% on yesterday’s close to 6325.2.

– Mike Preston

 

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