It’s a brave new world in which we find ourselves.
The likely outcomes of Saturday’s election – either a hung parliament or a very slim Turnbull majority with a complex senate – will not make for easy governing. For most issues that will mean extensive multiparty negotiations and little scope for bold, decisive action.
Regardless of the final count, the next parliament will need to find issues that can unite politicians across political lines. Innovation, with its formidable recent record of bipartisanship, should be one such issue.
Startups weren’t the central issue of this campaign. But effective startup policy will deliver substantial returns in terms of jobs, growth, and people – the core election issues of both major parties.
With a diverse Senate, it will be important that smaller parties are on board with the agenda too. The Greens and Nick Xenophon will play a big role in driving consensus – and they have every reason to support the startup agenda.
A couple of years ago I spent some time with Nick Xenophon in Israel, where he saw first-hand the transformative economic effect startups can have. He is committed to “strategically growing the innovation and technology sectors”. For the Greens, tech startups promise a vibrant new driver of economic growth with substantially reduced environmental externalities.
An ambitious startup agenda should therefore be pursued by all the key players. In a difficult period, this can be an area of strength for the new parliament.
We need to bring Australians with us on the journey
There’s still more work to be done in fostering public understanding about the strong link between high-growth technology startups and broader economic and social outcomes.
Tech startups are about turning ideas into reality, and when they succeed they drive economies forward in leaps and bounds.
Software companies make up 25% of the market cap of the top 100 companies in the US, and Apple, Google and Microsoft together are worth more than the whole ASX combined. The needs of transformative future-facing technology businesses will determine the skills that Aussie kids need to develop and the jobs that they desire. And they will drive economic growth derived from the value added by human capital, an asset Australia has in abundance.
We need to move away from thinking that this is about ‘handouts’ to the startup sector. It’s actually about helping our economy transition into the digital age more swiftly and effectively. It’s about addressing market gaps which limit the formation and growth of a truly meaningful technology sector in this country.
It’s about not missing out on the vast economic benefits technology has to offer.
What can we expect post-election?
Both major parties will likely influence the direction that innovation policy takes over the next three years. To get a sense of their respective priorities, it is helpful to consider their commitments and achievements to date.
Labor has announced a series of programs over the course of the last 18 months, focused on its core areas – skills and education. Notably, it has promised a $500 million startup co-investment fund. It has said it would improve the NBN, a commitment welcomed warmly by startup founders. It also supported many of the measures the Coalition implemented in the NISA, some of which would not have been possible without Labor’s backing.
The Coalition has the National Innovation and Science Agenda as a feather in its cap, having delivered a series of startup-friendly policies including tax incentives for startup investors, landing pads, and federal funding for incubators and accelerators. It is likely to continue the work promised in December, including some much-needed visa reform, and has promised to boost funding further for incubators and accelerators.
On a side note, whilst we don’t have the final figures overall, it is unfortunate to see the potential loss of one of Australia’s great startup champions in Wyatt Roy. As the assistant minister for innovation, Wyatt has made an enormous contribution to the conversation and the bipartisan policy framework around startups in Australia. We are much further forwards in this country because of his efforts and advocacy.
What’s still missing from the debate?
1. The R&D tax incentive
The Australian R&D tax incentive scheme is one of the best in the world and presents a fantastic opportunity to make a great asset for startups even better. We have been calling for the R&D tax incentive to be paid quarterly, and for the quantum to be doubled for early stage high-growth startups.
Innovation is driven by research and development, and Australia currently punches below its weight on R&D spending. We spend just over two per cent of GDP on R&D, while global leaders like Israel and South Korea are spending around four%.
To be in the top 10 in the world on this measure we would need to increase spending on R&D by about 30%, taking total spending to around 2.85% of GDP.
This proposal presents real bang for our taxpayer buck, delivering a genuine boost to R&D in a fiscally constrained environment.
We have also long advocated for a change to the way the R&D tax incentive is payed. It should be quarterly, rather than annual, to provide better cash flow for high growth early-stage claimants. Fast-growing startups are currently being forced to borrow against annual R&D tax incentive payments at extreme rates – up to 30% – just to keep up the pace of the business. This is an simple solution to a widespread concern.
2. Access to talent
Access to talent, and in particular globally experienced talent, is massively constraining our startup growth. We have a shortage of appropriately skilled technology professionals and mentors in Australia.
At a minimum, we need to take action to help make visas more accessible for Australian startups.
3. Employee share schemes
We also need to make employee share schemes more open, allowing fast-growing companies to keep hiring employees in Australia. This can be done with some relatively simple corporations law tweaks.
We’ve been reassured by the rhetorical commitment of both sides to startups and innovation during this election campaign. After the election startups will expect to see bold, ambitious policy development and implementation in support of that rhetoric.
The outcome of this election may make it tricky to take bold steps forward in many areas. But it’s vital we don’t miss this once in a generation opportunity to help our economy transition.
It will take some cross-party teamwork, but must continue to act decisively to take advantage of the vast opportunities technology offers.