SME tech investment – Australia’s plan B

It’d be nice to think small business owners can cash in on Australia’s mining and resources boom, but analysis of the Federal Government’s 2011-12 Budget suggests perhaps the reverse is true and that small business will be disadvantaged.

Australians have become all too familiar with the term ‘patchwork economy’ which refers to a situation where sectors that are exposed to mining are booming, while others are going backwards. Already commentators are predicting the Reserve Bank of Australia (RBA) will be forced to raise interest rates in June largely because of  unprecedented levels of investment in the resources sector and the effect this is having on inflation. The challenge the RBA faces is that while operating in a ‘patchwork economy’, monetary policy cannot manage all sectors of the economy.

Certainly one of the key takeaways from the Budget is the need for the Government to have a “plan B”, because too much dependency on the resource hungry China is risky and revenue forecasts rely on continued record highs in commodity prices.

I think small business investment should be plan B, after all, this humble and often forgotten sector employs 42% of the nation’s workers, represents 73% of all trading entities and contributes 46% to GDP.  As I’ve said in a recent presentation at KANZ and in my last blog a few weeks back, this sector is ripe for technology investment to boost productivity levels and make a significant contribution to GDP. Why not give small business the tools to prosper instead of relying on Asia?

What does the Budget hold for SMEs?

While the prospect of higher interest rates, a booming Australian dollar and a general skills shortage doesn’t bode well for small business owners, there were some elements in the Budget that are favourable to the SME sector. For instance new tax initiatives to help small business owners boost cashflow by taking advantage of extra deductions on the company car or ute, as well as instant write-offs for all assets under $5,000. Another boost to cashflow is the Government’s decision to bring forward the cut in the company tax rate to 29%. There’s also measures to bolster skills in the trade sectors, develop mentoring programs for employees and a continued commitment to the National Broadband Network for delivery of high speed broadband across the country.

Tinkering at the edges

The trouble is none of this goes far enough to realise the contribution to GDP small business could make. I think there could have been a greater focus on helping to drive productivity and in particular incentives to raise investment in technology. This is a view shared by the Australian Industry Group (AIG) which is calling for investment around innovation and business capability development. Retail bodies are also keen for some sort of technology funding scheme to encourage shop owners to move their businesses online so they can improve their marketing reach and compete with the influx of e-tailers at home and offshore.

While the future of Australia and economic prosperity is tied to factors outside of our control, namely China, investment in technology and innovation at home could help us break that reliance. This will lead to more jobs, more investment and who knows, maybe a better chance of a Budget ‘surplus’ in 2012/13??

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