Budget 2022: “How is that going to make a dent?” and other startup reactions
Labor just handed down its first federal budget in a decade and a lot of startups aren’t particularly happy.
Labor just handed down its first federal budget in a decade and a lot of startups aren’t particularly happy.
Treasurer Jim Chalmers repeatedly pushed the ‘fiscally responsible’ narrative during press conferences during lock-up and during his budget speech on Tuesday night.
Chalmers cited continued economic turmoil, rising energy costs and soaring inflation as key factors for the “responsible, affordable and sustainable” budget.
A large part of that involved redirecting and removing allocations from the former Liberal government’s budget. The ‘rorts and waste’ audit resulted in $21 billion in savings by the new government.
Unsurprisingly, the pared-back budget has been met with some backlash, particularly from the startup and small business communities.
Startup and SME support
As we reported on budget night, ‘startups’ only received one mention in the papers, and it was specifically about its Startup Year program. If you’re unfamiliar, it’s not a grant, but a HELP-style loan for university students that they’ll have to pay back.
Compared to previous budgets, only a handful of incentives that will benefit startups were included, such as mental health and debt counselling support. as well as a fund to encourage clean energy equipment upgrades.
Further to this, $197.7 million is being redirected from what it’s called “uncommitted funding” from the Entrepreneurs’ Program. The program recently came under review by the Australian National Audit Office, which called into question the rigour of how the program was managed.
While there were some other measures put in place for small businesses, founders wanted to see the budget stretch further.
Martin Herbst, CEO of JobAdder:
“Small and medium businesses were not the winners of the budget and it’s disappointing that there wasn’t more mention of robust incentives to support them fiscally.
“In saying that, it’s encouraging to see the Labor government recognise the challenges of being a small business owner with $15 million going to mental health support and debt counselling services for small businesses, and the NewAccess for Small Business Owners program introduced.
“The $62.6 million to fund energy efficient equipment upgrades for SMEs is also a small but helpful start to providing the relief they need.”
Skye Theodorou, CEO and co-founder of upcover:
“The budget is surprisingly lacking for the fact that startups and new and emerging businesses are the confidence and optimism that will help Australia curb a recession. The fact that 41% of students are looking to become an entrepreneur just demonstrates this, and facilitating idea and prototype programs in university for 2,000 students is a nice touch, but one that won’t likely add jobs and contribute to the economy in a significant way.
“Redirecting funding from the entrepreneurs program is just another example of government-led funding of the startup ecosystem that just doesn’t back scalable startups or founders when they need the capital most. Often these programs and fund mandates vary. The intent of the program changes dramatically from conception to end state, typically losing its ability to generate value or even help the government back businesses that will contribute significantly to the economy.”
Luke Fossett, director of sales, GoCardless:
“To date, fintech developments have been largely disregarded and underfunded, contributing to the immaturity of the industry that is pushing out players.
“We’re yet to see any real commitment from governments to ease the red tape stifling the Consumer Data Right (CDR), nor any incentives to encourage fintech innovators to become accredited data recipients (ADR) which can be expensive and does not drive ROI if we’re unable to unlock its full utility.
“Fintech needs basic support from policy-makers if the industry is to deliver on its potential to drive value back into the pockets of everyday Australians in an environment where they’ll need it most.”
Ben Thompson, founder and CEO of Employment Hero:
“Chalmer’s budget forecasts that real wages will not start to grow until 2024. Employment Hero’s SME Index suggests a different story on wage growth — that it has outpaced inflation and not the other way around. Year-on-year median wages increased overall by 7.9% in September 2022 and by 1% over the last month.
“With inflation set to peak at 7.75% later this year, we’re concerned that when the interest rate increases bite, as they inevitably will, SMEs will struggle to maintain headcount.
“Unemployment is set to hit 4.5% in 2023-24, which is relatively low. I anticipate that business leaders may take a more cautious approach over the coming months as we see the impact of higher interest rates working their way through the economy. This is where funding is needed to support SMEs. Cashflow is the biggest issue for SMEs, and increasing the hourly rate is a much bigger challenge than flexibility in total remuneration and benefits offered to employees.”
Women in business and STEM
Labor’s 2022 budget highlights the continued inequality of Australian women in the workplace. The budget papers state that women continue to do a “disproportionate amount” of unpaid work. Further to that, the gender pay gap in Australia still sits at 14.1% and on average a full-time working woman earns roughly $263.90 less per week than men.
The government is looking to address this primarily largely through childcare subsidies as well as increases to the Paid Parental Leave Scheme.
This doesn’t really address women in the workplace outside of roles as mothers. That’s not to say there weren’t line items in the budget — $32 million is going towards working women’s centres across the country. And there was mention of a previously-announced Women’s Economic Equality Taskforce to address gender equality in the workforce.
But there wasn’t a lot else. A mere $5.8 million over five years will go towards the Women in STEM and Entrepreneurship program and undertake an independent review of existing STEM programs.
Simultaneously, $3.9 million over two years has been removed from the Supporting Women’s Mid-Career Transition into the Tech Workforce component of the 2022–23 March budget.
This lack of support for women in the workplace outside of motherhood, particularly those in STEM, is disappointing.
Skye Theodorou, CEO and co-founder of upcover:
“The paid parental leave scheme is great and more importantly the child care rebate of $1200, however it is not significant for businesses that support returning to work mothers, founders whether male or female that often juggle early parenthood. It just doesn’t address the problem that childcare costs in Australia are some of the highest in the world.
“It also ignores the childcare crisis in regional areas across Australia.
“To paint the picture here — I myself put 80% of my salary to a nanny paying $1100 a week for seven hours a day, four days a week only, and I have no access to the child care subsidy as private care is excluded. My 11-month-old son is on 15 waitlists for family daycares and child care centres in my region of the mid-north coast of NSW and I have no guaranteed place for him even in 2023.”
Shivani Gopal, founder at ELLADEX:
“The budget appears to have many issues left on the table: especially for women in business.
“Superannuation payments on PPL would barely make a dent in the budget, but it would go a long way in meeting women’s superannuation gap, often at a third of men’s superannuation balances by the time of retirement. This issue was addressed heavily in March of this year, yet left untouched in last night’s announcement.
“Watching the budget I was encouraged to see support in funding for violence against women initiatives, families and childcare. But I earnestly waited for announcements of support for key areas in which women need additional investment: leadership, STEM and entrepreneurship, but towards the end of the speech it dawned on me: there is nothing coming for us.
“The ‘why’ of these support measures can be quantified in numbers: women make up less than 35% of key management personnel according to WGEA, despite being 50% of the population. Women earn less than 3% of the world’s VC capital, and Australia’s VC opportunities are slimmer still, compared to the VC global appetite.
“Women in business appear to have moved off the back of tonight’s budget, from being an afterthought to being forgotten altogether. We welcome support for families. Bit news flash 2022 Labor Government: not all parents are mothers. Not all women want to be mothers. As voting citizens, they need budgetary support too.”
Cybersecurity
Very little was said in the budget about cybersecurity, which isn’t great timing considering the deluge of data breaches and hacks of Australian businesses over the last few weeks.
The main line item was $12.6 million over four years to tackle online scams and fraud.
Ajay Unni, CEO of StickmanCyber:
“How many breaches need to occur before the government realises the seriousness of cybersecurity? Penalties are not a deterrent for these breaches if there is a lack of standards and knowledge that leads to these insufficient practices in the first place.
“$12.6 million over four years to protect 10s of millions of consumers, is a joke. How is that going to make a dent? That funding is to combat scams and online fraud, with the bulk going towards a National Anti-Scam Centre.
“Because consumer education is an area that must be further addressed, as most cyberattacks and breaches are the result of human error. Appropriate funding for digital safety and education is needed to ensure everyone who uses a device has a basic understanding of cyber-hygiene principles.
“With Australians’ data at risk, there needs to be a look at the bigger picture here, not haphazard funding for government departments and increased penalties for corporations.
“Harsher fines are not the answer. Instead, the government should be helping to protect consumers’ data by enforcing businesses to invest in a minimum level of cybersecurity. This could be either tax deductible or come with a rebate for any organisation that is dealing directly or indirectly with consumer data. “
Renewable energy and EVs
Renewable energy was arguably one of the budget winners, with more of a focus placed on this sector than ever before. More than $2 billion was dedicated to projects and incentives under the Powering Australia banner.
To name a few, $62.6 million over three years will go to SMEs so they can fund energy-efficient equipment upgrades. And $224.3 million will be dedicated to community batteries to help power household solar. A further $102.2 million will go towards the government’s Community Solar banks program.
The budget papers also revealed the first-ever federal incentives (in the form of tax cuts) for electric vehicle uptake. And $275.4 million will go towards cheap clean transport.
And this is great! But we need to keep in mind that EVs are still pricey, with the cheapest in Australia starting at over $44,000. And when it comes to solar power for homes, this can also be expensive endeavours and are largely inaccessible to apartment dwellers and renters.
Aaron Hilton, CEO and founder, PowerPlay:
“The government budget announcements on renewable energy investment are welcomed. They are targeted in areas that will definitely accelerate the energy transition and do seem to represent the pragmatic approach the government is advocating for.
“Installing batteries in remote communities is a good investment as it reduces the high cost of the 1000s of kilometres of poles and wires network throughout regional Australia. The government also recognises that renters and those who cannot get solar are missing out on the cheaper energy that solar can provide.
“The proposed community battery banks is an interesting strategy but with so many stakeholders involved the devil will be in the detail of how it all works and which will ultimately decide the actual benefit that flows to the community.
“The commitment to help 25,000 households who are unable to install rooftop solar is only a drop in the bucket and will no doubt disappoint many who are stuck in rental accommodation.
“We will be talking to the government about how there are other ways to assist renters and those in apartments with scalable and decentralised technology. This emergent technology will enable many young people that cannot get solar panels to still play an active role in reducing their energy costs, reducing CO2 emissions and accelerating the renewable energy transition.
“The federal government’s investments that will reduce reliance on fossil fuel will take time to bear fruit, but they certainly will reduce energy costs in time.”
Siddharth Shankar, general manager of Zoomo Australia:
“We welcome the government’s plans to prioritise renewable energy and the broader environment, and ultimately support the nation in its race to get to net zero.
“Whilst the renewed focus on electric mobility from the Albanese government is a step in the right direction, we feel the budget failed to recognise the full breadth of electric vehicles in the sector. Light electric vehicles (LEVs), like e-bikes and e-cargo bikes, have undergone significant advancements in the last several years. Yet they have not been allocated the same level of incentives as electric cars despite their outsized impact on both emissions reductions and cost savings.
“Individuals and businesses who have made the transition from traditional, petrol-powered vehicles to light modern alternatives, have seen significant savings in operational costs each year. When you take into account just how essential commercial transport is for businesses alone, it’s undeniable that LEVs have the potential to help stem the cost of living crisis.”
Stavros Yallouridis, CEO, Motor Traders’ Association NSW:
“We’re pleased to see increasing electric vehicle adoption being given a place in the Federal Budget, but the Motor Traders Association of NSW warns there is still a lot to do if mass adoption is to become a reality. Merely cutting the price of some EVs is not going to see Australia catch up with countries leading the EV adoption charge.
“NSW and Australia’s road infrastructure as well as maintenance and supply systems are in need of significant improvements and updates.
“Specialist training in electric car and battery maintenance for mechanics is critical to avoid workplace safety dangers and driver risks. In other words, the vehicles that the government is incentivising the purchase of will need specialised maintenance that involves working with electricity — and that requires new equipment and careful training. Otherwise, they are putting the electric cart before the horse!
“This training needs to be rolled out quickly and efficiently in a manner that is hands-on for the mechanics with state-of-the-art equipment to keep up with the rapid pace of development witnessed in EVs.
“The Treasurer has announced a ‘fiscally sensible budget’ focused on setting the country up through difficult times ahead, however, this budget does not address the major issues in the automotive sector, such as skills shortages, training and infrastructure to meet the government’s own targets on transitioning to EV.
“While the federal government has increased the skilled migration cap, it has not taken into account the rollout of electric vehicles and how this will further exacerbate the current skills shortage within our industry as we face the biggest transition period in our history.”
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