Small and medium technology sector could be wiped out

The architect of the Federal Government’s Innovation Review, Terry Cutler, has warned that many companies in Australia’s small and medium technology sector, are in grave danger of being wiped out next year, taking the next wave of innovation and job creat

And he also expressed concern that the government is taking a huge risk backing the car industry at a time when they the global car industry is facing such volatility and its future direction uncertain.

In a frank interview with SmartCompany this morning, Cutler, who handed his Innovation Review report to the federal Government in September, says he is concerned that many of the proposals put forward in the review will be scrapped because of fiscal pressures.

“We know now from the mid term review of budget forecast that we are in a much more fiscally constrained environment and there will be trade offs,” he says.

He says well known technology startups are starting to see pressure from banks and there is no chance for these companies to get new capital.

“Every technology start up I talk to is expressing severe anxiety, he says. “I am seeing the SMEs in the technology sector as the most vulnerable part of the economy.”

He says that many of these companies would have been recipients of the grants programs that have been scrapped by this government including the Commercial Ready program.

“The firms that had expectations of getting those Commercial Ready grants are certainly facing a bleak future,” he says.

Cutler says this wave of companies are the SMEs that drive the next wave of innovation. “If we don’t look after them now we are going to come out of this deep recession without the capability of these SMEs,” he says.

This would affect the big end of town. “We know they innovate by acquiring the technology of these SMEs. And we know it is technology based innovation that drives productivity. We also know that productivity growth has stalled in Australia. Yet we are in danger of stalling the key source of innovation growth.”

He says that if he has to cherry pick the parts of the review which should be implemented then the government should focus is implementing the tax credit for business. Cutler had recommended a 50% refundable tax credit fro companies with turnover of under $50 million.

“This would be an immediate benefit for technology SMEs. Those not making a profit will receive a tax credit refundable for up to half of what they spend on R&D and this is a cash refund which will provide them with immediate assistance. It also makes forward budgeting possible and takes a lot of pressure off SMEs.

He also wants to government to ensure that early stage funding schemes are guaranteed and suggestions to improve accessibility to government procurement schemes is implemented.

He says that the government is facing a huge challenge in setting the direction of innovation. The car industry is driven by technology and innovation, he says. But he says more questions need to be asked about how to ensure that our national investment is around a sustainable industry.

“The real challenge is what we do here is so dependent on what happens in the US and whether there is a total meltdown in Detroitte. Noone has a good fix on what this will look like in ten years time.

He says there is nothing wrong with supporting an industry structural adjustment like the car industry “ as long as it is heading in the right direction.”

”The Government is going to have to monitor the industry vey closely as we go forward,” he says. Meanwhile an industry that does need support could well be overlooked. “Technology SMEs in a global recession are the most at risk.”