Labor's budget was the right call on housing. But for startups, changes to capital gains tax were a wrong turn. I know because, before becoming a vice-chancellor, I was a business founder and entrepreneur. My firm, Seeing Machines, pioneered computer vision technologies. It is now a leader in its field and listed on the London Stock Exchange. Like most success stories, the early days were tough. Anyone who has started a small business has endured the long hours, low resources, meagre income, and the many challenges that come with commercialising an idea.
In the fledgling phase of a new venture, investors are not easy to find. The potential returns are high, but so is the risk. Accordingly, without a mitigating mechanism, typically a concession from government, early-stage venture capital will take its money elsewhere, for example, to the US or Canada where tax exemptions remain for backing startups. By replacing the flat 50 per cent capital gains tax discount with an inflation-adjusted indexation method, this budget takes away the incentive to risk investing in unproven businesses. Worse, it heightens the risk to investors should a venture fail.
Discouraging entrepreneurs from taking risks is a major misstep. Our nation's productivity - which relies on innovations - has also taken a hit. This was a disappointing budget for research and development. My time at the nation's scientific body, CSIRO, confirmed just how vital R&D is in driving job creation and economic growth. Both outcomes depend on close collaboration between Australia's research sector and industry. The budget wound up the productive Trailblazer program. This program, launched under the Morrison government, saw industry (with many SMEs and startups), government and universities all take a stake in backing R&D. The classic three-legged stool. It focused its energies in areas vital to Australia's sovereign capacity, like defence, space, energy and resources. It is working.
Around the country, Trailblazer collaborations are delivering crucial economic multipliers. The resources and critical minerals program, in which Curtin University is a partner, has brought in more than $100 million in industry investment. The recycling and clean energy program, in which the University of Newcastle is a partner, attracted more than $130 million of industry funds and launched a $1.7 million early-stage seed fund for startups. Trailblazer is a proven program that ensures knowledge creation leads to at-scale commercial outcomes for Australia. This budget walks away from that objective.
Likewise, the Australia's Economic Accelerator program was also abandoned, with $800 million in program funds "repurposed".
These budget measures crimp the R&D pipeline between universities and business. They do so when we need to be strengthening that nexus. This withdrawal of government support also has consequences for job creation and Australia's workforce capacity. Universities have been building incentives and training for our staff and students to start new ventures and commercialise publicly-funded R&D. This productivity growth stream will dry up.
On the one-hand we have a government, under its higher education Accord reforms, seeking to lift the tertiary education attainment rate. That is an objective the university sector unequivocally supports. Yet on the other hand, we have budget measures that stifle investment in the very areas that grow skilled employment opportunities.
Make no mistake, it is admirable to frame a budget around the issue of fairness.
Focusing on areas of demonstrable intergenerational inequity, like housing, is a pragmatic way to restore the balance. Unfortunately, this budget does not live up to that promise. Instead of calibrating its interventions to target housing, it extends into areas of the economy that were proving effective in addressing Australia's lagging productivity. That raises the question whether this government understands the realities emerging businesses confront. Signals from the ministry that they will work with the tech and startup sector on implementation are a welcome sign - it's critical we get this right. The first rule in business is stick with what works, and do more of it. At the moment, this component of the budget does the opposite.
