news An industry group representing venture capitalists and private equity firms has heavily criticised the Federal Government’s substantial cuts to supporting startup and venture capital resources as part of this year’s budget, backing startup industry commments that the Government must move quickly to fill the gap it has created.
In Tuesday night’s Federal Budget, the Government made good on the threat delivered this month by its Commission of Audit to “abolish” key early stage innovation industry support vehicles Commercialisation Australia and the Innovation Investment Fund (IIF), with the pair and others to be rolled into a new body dubbed the ‘Entrepreneurs’ Infrastructure Programme’.
The Government also cut the funding of ICT research group National ICT Australia and chopped the Interactive Games Fund, which had been supporting the video game development scene.
In a statement issued in the wake of the Budget on Tuesday night, the Australian Private Equity & Venture Capital Association (AVCAL) acknowledged the Budget had confirmed plans to implement major short-term savings through the abolition of key innovation industry program, but without there being a complete picture of how businesses will be encouraged to transition into a more innovative and internationally competitive economy in the future.
“Everyone was expecting to see plenty of short-term pain for businesses in this budget – and that’s exactly what we got,” said AVCAL’s Chief Executive, Yasser El-Ansary.
“But what we were also expecting to see tonight was a plan which set out the longer-term vision for what the Australian economy will look like in the next five or ten years – the short-term strategy of deep cuts to expenditure only makes sense when you can line it up against a picture of where we are trying to get to.”
AVCAL specifically criticised the removal of the IIF, which it said had been highly successful over its extended tenure. “Abolishing the Innovation Investment Fund represents a major set-back to Australia’s capacity to foster a stronger venture capital industry that can drive businesses in the new corridors of economic growth for our future,” El-Ansary.
“The establishment of a new Medical Research Future Fund could support greater investment into biotechnology into the future, but it has to be designed in a way that encompasses a focus on commercialisation as well as pure research. The new Entrepreneurs’ Infrastructure Programme will have to be framed around backing Australian businesses with world-class ideas that can be supported by private sector investment from the venture capital industry.”
AVCAL also addressed the issue of Australia’s global position compared with other economies.
“Business was looking at this budget as an opportunity to kick-start a renewed focus on lifting Australia’s competitive position in the international race for capital and skills, and while a cut to the corporate income tax rate is a step in the right direction, there is a lot more that needs to be done,” said El-Ansary.
AVCAL said that in the World Economic Forum’s Global Competitiveness Index, Australia currently ranks number 15 in the group of 34 OECD countries. AVCAL has advocated for some time for changes to be made to tax settings that would help to make Australia a more attractive destination for domestic and offshore investors.
AVCAL will turn its attention over coming weeks towards pressing the Government to map out a plan for how it will encourage greater investment into business and innovation in Australia, through the National Industry Investment and Competiveness Agenda, which is due to be released in the coming months.
Other groups have also heavily criticised the Government’s moves. Technology startup industry group StartupAUS, for example, said the abolition of Commercialisation Australia removed “a vital lifeline for Australian startups and much needed support for angel investment”. The group has also called for the Government to fill the gap it ha created, in particularly through reforming the controversial Employee Share Scheme regulations.
The Game Developers Association of Australia has similarly said it was “disappointed and mystified” by the decision to cut the Interactive Games Fund, stating that it was “completely at odds with the government’s claims of support for Australian culture and innovation”.