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The pressure will be on the Government to boost funding for the tech sector after Australia’s Budget earlier this month included several front-foot moves.
They came on top of earlier multibillion-dollar boosts in areas like cybersecurity and gaming that have put the Lucky Country well ahead of New Zealand, even on per capita terms, for recent public-private tech initiatives.
In this country there have been several damp-squib budgets for the sector in a row.
With borders reopening and visa restrictions liberalised - if still not as much as most in the tech sector would like - the focus has turned to other hiring challenges, and threats to our local industry.
Since July 1, companies in Australia have been able to claim a tax rebate of between 30c and 40c for every dollar they spend developing a computer game - a scheme bankrolled to the tune of A$1.2 billion ($1.284b) in last year’s Federal Budget.
Here, the game industry complains that while the Government touts it as our next billion-dollar export success story, it’s at a “crisis” point. NZ Game Developers Association chairwoman Chelsea Rapp says firms are relocating across the Tasman, and key staff are being lured across the ditch. Her group wants the NZ Government to introduce an equivalent tax rebate here, or to extend the New Zealand Screen Production Grant to cover the gaming sector too. The two fields compete for the same production talent pool. Rapp wants a level playing field.
A counter voice has come from the NZ Initiative’s Eric Crampton, who says NZ should not get into a bidding war with a deeper-pocketed country - but rather lobby Australia to drop its game industry subsidy.
Earlier this year, then Digital Economy Minister David Clark added $1 million per year to the $2.25m “Code” programme of grants to gaming startups. His successor, Ginny Andersen, has hinted there could be a more meaningful leg-up on the way.
Australia’s Budget 2023 included A$2b for new digital initiatives, with most tied to e-safety.
They included A$86.5m to establish a new National Anti-Scam Centre, which will include establishing Australia’s first SMS Sender ID Registry to help prevent scammers from imitating trusted brand names. Given our telcos, and various agencies, have been unable to stem a barrage of scam emails and texts, it’s an area to watch out for in our Budget 2023.
The Aussies also saw A$46.5m earmarked to establish a Co-ordinator for Cyber Security to co-ordinate multi-agency efforts in the event of a cyber incident - something New Zealand could do with given its stew of agencies attempting to grapple with the rise and rise of cybercrime.
The office of Australia’s e-Safety Commissioner (its rough equivalent to NZ’s Netsafe) saw its funding quadruple with a A$131m injection. Here, Netsafe has probably already had its lot for 2023 via a recently announced one-off $690,000 increase. It’s total funding is around $4.5m.
NZ’s venture capital scene was jolted into life in 2020 with the creation of the $300m Elevate Fund, managed by the Crown-backed NZ Growth Capital Partners (NZCGP). Along with low interest rates and various pandemic-fuelled shifts in tech, Elevate’s co-investment with various private partners saw the NZ VC scene boom. But now the $300m has run dry - and, in fact, it was only ever funded to $259.5m. NZGCP has been in talks with Treasury, MBIE and the NZ Super Fund (which provided most of the initial Elevate capital) for a top-up.
As rates rise and private venture capital sputters (early-stage companies raised $112m in the second half of 2022, a 48 percent drop), every VC player spoken to by the Herald wanted to see Elevate topped up. These spanned from our largest VC fund manager, Movac, to Angel Association executive chairwoman Suse Reyolds, who told the Herald continued public-private co-ordination was needed in the sector, including more funds for Elevate.
“They say it takes a village to raise a child. It takes a country to raise a startup,” she said.
Australia’s Budget 2023 included a new A$392m fund to help startups “commercialise their ideas”.
With its Budget 2023, Australia’s Government (as previously flagged) adopted the OECD’s Global Pillar Two Anti-Base Erosion (GloBE) measure to institute a 15 per cent minimum global corporate tax rate.
It means Australia will be allowed to apply a top-up tax on a resident multinational parent or subsidiary company where the group’s income is taxed below 15 per cent overseas.
The measure, which applies to firms with global revenue of €20b ($34.86b) or more, will apply from January 2024 - and is expected to bring in an extra A$370m in tax revenue, with around half from “Big Tech” firms.
Some 130 countries agreed to Pillar Two - in principle - back in 2021 but without any binding commitment to implement it. Australia is one of the first, after South Korea, to actually implement it.
NZRise - a ginger group representing local IT firms - has been pushing the Government to take a tougher line on Big Tech with tax, saying it skews the playing field for local tenders. But with NZ taking a slower, more cautious approach, it’s likely off the table for Budget 2023.
Outgoing InternetNZ head Jordan Carter was disappointed that Budget 2022 offered little to close the divide between the digital haves and have-nots, which was brought into stark relief during lockdowns.
Clark’s Digital Strategy for Aotearoa plan, released last September, included a number of ideas for closing the digital divide, and - in a closely related area - boosting support for tech education in schools, and drawing a more diverse range of students in tech-friendly subjects.
Moves in both areas would help top up the funnel as the tech skills shortage persists. But it’s not a done deal that any of the Digital Strategy action points will make the leap from PowerPoint to reality and get funded with Budget 2023.
The Technology Users Association is among the groups that have been pushing for more funds to boost rural broadband infrastructure. Earlier this month, the Government announced that Spark, Vodafone and 2degrees would each spend $24m more than they had originally budgeted for boosting mobile and wireless broadband coverage in rural NZ - as a quid pro quo for getting 5G spectrum free rather than having to bid for it (the 4G auction in 2016 raised $259m).
That could be it in terms of major new rural broadband funding. Anyone in the country who’s still mad about slow broadband might have to put down Budget 2023 and pick up the phone to Elon Musk’s Starlink.
There’s an outside chance we could see an extension of the UFB fibre rollout (which officially wrapped up last December) to cover 90 per cent rather than 87 per cent of the country - an idea canvassed in MBIE’s Lifting Connectivity in Aotearoa New Zealand report.
The Australian Budget allocated A$101.2m to a critical technology fund that will be used to help create governance rules for artificial technology, and “support small and medium enterprises’ adoption of AI technologies to improve business processes and increase trade competitiveness”.
A similar move might prove too esoteric to be matched in a meat-and-potatoes, cost-of-living priorities NZ Budget, but it’s something to keep an eye on for future years. Maybe ChatGPT could tell us how we could afford it.
The industry faces challenges but hopes to bring newcomers and veterans together.