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Australian budget lends support to digital economy

Australia’s A$1.2bn Digital Economy Strategy ticks most of the right boxes, but some industry experts say areas such as broadband infrastructure and artificial intelligence are still underfunded

The Australian government is strengthening the country’s digital economy through new investments in artificial intelligence (AI), cyber security and digital government services, among other areas.

The investments, aimed at bolstering Australia’s competitiveness in the global technology sector, are part of the government’s 2021-2022 budget, which was unveiled last week.

The centrepiece of the budget is arguably the A$1.2bn Digital Economy Strategy, a set of policies and actions the government is taking to grow Australia’s future as a leading digital economy by 2030.

But to put that expenditure into perspective, it is less than half of the A$2.6bn earmarked for a single 6km road project in Adelaide – even as it is welcomed by some quarters of the technology industry.

“It’s pleasing to see the published Digital Economy Strategy,” said Brad Newton, managing director of Cohesity in Australia and New Zealand. “It has been a top priority for some time, but it needs funding and resource, which it appears it will now receive.

“The tech industry needs to be more vocal about what IT can do here and how it can help improve productivity for Australia and work with the government, which can help promote best practices, from which other departments or organisations can learn.”

Among the A$124m of new funding for the country’s AI capability is money for a National AI Centre.

“It’s fantastic to see the federal budget include A$1.2bn for a Digital Economy Strategy, with A$50m dedicated to a National AI Centre within CSIRO [Commonwealth Scientific and Industrial Research Organisation],” said Michael Gately, CEO and co-founder of Australian AI specialist Trellis Data.

“Government funding is integral to the growth of our AI sector, particularly as we know that Australia is currently lagging behind other key markets such as Asia, Europe and North America.”

But the Australian Information Industry Association (AIIA) believes AI is still being underfunded. Its CEO, Ron Gauci, said in April 2021 that to fully fund a national AI strategy, A$250m million was needed, without which Australia would continue to lag behind the rest of the world.

Tightening cyber security

With data breaches growing in Australia and looming concerns over cyber security, the government has allocated A$33.5m over four years for initiatives to enhance the security of Australia’s mobile networks, accelerate commercialisation of sovereign network and data security solutions, and deliver a national data security action plan co-designed with industry.

David Tudehope, CEO of Macquarie Telecom, said the data security action plan foreshadows a push to prioritise the protection of Australia’s digital sovereignty by focusing on sovereign Australian network and data. “This aligns strongly with comments made by various ministers and senior bureaucrats in recent months,” he added.

But it should not just be about protecting IT infrastructure from cyber attacks.

Mark Unwin, an adviser at IT advisory and consulting firm IBRS, noted that small businesses are particularly vulnerable to ransomware and other threats, while large enterprises have chief technology officers and chief information security officers to work to protect them from such issues.

Government funding is integral to the growth of our AI sector, particularly as we know that Australia is currently lagging behind other key markets such as Asia, Europe and North America
Michael Gately, Trellis Data

As for consumers, Nexion Networks CEO Paul Glass said more must be done to address misconceptions that applications must be secure just because they are available and widely used.

“There have been multiple large-scale illustrations of security failures in some of the most common apps we use every day,” said Glass. “The government has a responsibility to not only hold global application providers to stringent security audits and compliance, but to invest in country-wide controls for the adoption of new technology by consumers.”

Pieter Danhieux, co-founder and CEO of Secure Code Warrior, a provider of code security training, said more can be done to raise the cyber security agenda in the highest rungs of government.

“It is troubling that we still don’t have a dedicated cabinet role for cyber security in Australia, and as such, even with funding, it is easy to be ‘out of sight, out of mind’,” he said, warning that this approach of maintaining the status quo has been ineffective to date.

Tax breaks

To spur innovation and encourage businesses to undertake research and development (R&D) and keep patents in Australia, A$206m has been set aside for a patent box scheme, an arrangement that reduces the tax payable on income associated with locally developed intellectual property.

The AIIA’s Gauci said medical technology and biotechnology companies are expected to be the first beneficiaries of the patent box scheme, adding that the industry association will “work to ensure that these incentives are extended to other areas of the ICT industry”.

Rupert Grayston, CEO of the Australian Computer Society (ACS), said further reforms to the R&D tax incentive and depreciation regime will boost technology jobs.

To support businesses and create more jobs, the government has also extended temporary full expensing and temporary loss carry-back for a further year.

Eligible businesses can claim an immediate deduction for the business portion of the cost of an asset in the year the asset is first used or installed ready for use.

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This extension will enable businesses experiencing Covid‑19-related supply disruptions, or considering investing in projects requiring longer planning times, to take advantage of the incentives.

Macquarie Telecom’s Tudehope said the instant asset write-off extension will be welcomed across the economy, including the ICT sector.

Some small businesses have already taken the opportunity to refresh their IT environments during the pandemic, said Unwin, sometimes in order to support working from home. But there is still more that can be done, so the instant write-off extension will be welcome, he added.

The treatment of employee share schemes has long been a bone of contention, but a change introduced in the budget removes the cessation of employment as a taxing point.

“We are pleased the federal government has heeded calls for reforms to grow our startup and innovation industries with changes to employee share ownership rules,” said Tom Seymour, CEO of PricewaterhouseCoopers Australia.

Digital government services

The budget also includes A$200m for an overhaul of the myGov portal, and A$301m to enhance the My Health Record system.

Luke McCormack, vice-president and managing director of Pega Asia-Pacific, said: “To see the government commit to investing over A$500m to enhance government services is truly exciting news for Australian citizens. It shows the government is prioritising the right areas as Australians seek improved digital experiences when engaging government services.”

The government also allocated A$26.2m to improve the safety of online spaces for women and children, including A$3m over four years for a pilot programme to develop software that investigates intimate images shared without consent.

Julie Inman Grant, eSafety commissioner, welcomed this announcement, noting that the funding will “give us the opportunity to pilot new technologies that can assist in the better detection of intimate images reported to us that have been shared without consent”.

She added: “We know that detection and the rapid removal of these images is critical in helping minimise the distress women experience.”

Small business digitisation

Among the smaller budget measures is a A$12.7m expansion of advisory services for small businesses wanting to digitise.

“We see this as an excellent opportunity for Australian SMBs [small and medium-sized businesses] to evolve in the technology that they use, so they may engage on a more personal level with their customers,” said Will Drysdale, Asia-Pacific sales manager at ActiveCampaign, a sales and marketing automation platform.

A further A$15.3m will be spent on encouraging the use of e-invoicing. Trent Innes, managing director for Xero Australia and Asia, said e-invoicing will ultimately lead to faster payments and more efficient invoice processing for businesses. “This increases productive capital available to businesses, leading to increased output and headcount,” he said.

Building digital skills

To develop digital skills in Australia’s workforce, A$100m has been allocated to support various programmes, including work-based digital cadetships that offer a flexible way for workers to build digital skills, along with investments in the cyber workforce and scholarships for emerging technology graduates.

The AIIA’s Gauci said: “We represent the technology employers of Australia, so we look forward to working with the government to deliver its digital cadetship policy to ensure that people can embark on their digital careers and build skills and capability.”

Jane Livesey, CEO of Cognizant in Australia and New Zealand, said that while governments are often criticised for not thinking past the next election, she wondered whether the current government is guilty of “long-termism”.

“It is positive to see the longer-term plans for building future digital skills,” she said. “However, there is an immediate need to provide a programme to support young, technology-literate Australians into digital apprenticeships.” She noted that this would help to grow the national pool of talent available to work on critical digital and cyber programmes.

To encourage female participation in the workforce, the government is also stumping up A$42.4m to enable women to pursue science, technology, engineering and mathematics (STEM) qualifications and is expanding the national careers institute partnership grants programme to provide more career opportunities for women.

We shouldn’t be having any stutter on Zoom calls from people’s homes, yet it still occurs with the current NBN quality delivered in business hours
Mark Unwin, IBRS

“One important boost for the technology sector and the broader economy would be to boost female participation in the ICT sector,” said ACS’s Grayston. The latest edition of the ACS’s Digital Pulse report found that if Australia addresses the technology industry’s gender imbalance, the economy could see 5,000 more jobs and a boost of A$1.8bn a year.

The digital skills announcement was welcomed by the Professionals Australia network, although its CEO, Jill McCabe, said the budget still “fails to invest in the skills of engineers, scientists, ICT professionals, pharmacists and other technical professions by not committing to career-long learning, modular forms of training or re-skilling, to ensure an agile and well-trained workforce is available to lead us into economic recovery”.

Unwin said the amount being spent on skills is a “big number” but questioned how it will be delivered, noting that the technical and further education sector remains a state responsibility.

He noted the focus on training young workers and suggested the impact of ageism had not been taken into account, especially at a time when people are expected to retire later.

“This is a challenging area for the government,” said Unwin, so there is room for a wider view of diversity.

Digitising the aged care sector

A $17.7bn reform package will provide higher quality and safer care for senior Australians, an initiative that may benefit the broader IT industry.

Sam Deckert, founder and principal consultant at Peak Insight, an enterprise communications service provider, said the billions of dollars allocated to aged care in the next few years will support the sector’s acceleration towards greater digitisation, particularly in areas such as remote working, e-invoicing, telehealth and video collaboration.

He said this will spur aged care providers to invest in IT solutions that deliver a high quality of care and a “first-class business operation with more efficient decision-making and a greater ability to successfully plan current and future services”.

Jarrod McGrath, CEO of Smart WFM, a human capital management consultancy, said aged care providers will need to adopt modern workforce management practices, as other changes affecting the sector will require an overhaul of bargaining agreements for aged care staff, digital foundation skills training and new digital systems to track how care time is spent.

“Many providers still use paper-based systems to manage their workforce – that can’t happen any more,” he said.

Transforming Australia’s economy

Summing up the budget for Australia’s digital economy, Simon Vatcher, Avaya’s managing director for Australia and New Zealand, said the digital-aligned budget, underscored by infrastructure and skills, will support the ambitions of local organisations to adapt to the digital economy, and will also contribute to a broader transformation of the Australian economy.

Unwin applauded the government for risking this expenditure, but added: “The question will be how to get the rubber on the road.”

Infrastructure spending brings easy wins, he said, but improving workforce skills is a harder task. One of the worst things that could happen would be for the government to underspend, and then claim in a couple of years that the reduced spending was a positive thing.

Unwin said the government also needs to lead and expand the backbone infrastructure around the National Broadband Network (NBN), as well as 5G and 6G networks, to provide real benefit for SMBs.

“We shouldn’t be having any stutter on Zoom calls from people’s homes, yet it still occurs with the current NBN quality delivered in business hours,” he added.

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