What will be in Budget 2024 for tech?
The coalition Government will unveil its maiden budget on Thursday, and the country has already been softened up to expect little in the way of significant new funding beyond what has already been announced in areas such as corrections, education, and for a budget increase at Pharmac.
Australia may have gone big two weeks ago on advanced manufacturing initiatives, sunk nearly $500 million into a single investment in quantum computing startup PsiQuantum, and committed an additional A$288 million to Australia’s Digital ID scheme bringing the total to nearly A$1 billion as well as additional funding for cybersecurity.
But Australia is a much larger and wealthier country and delivered a budget surplus last year and this year. We are unlikely to see similar growth-orientated tech and digital initiatives this year, not that the National Party, which owns most of the tech-related policy, isn’t interested in spending on tech, which it sees as an economic growth enabler.
NZ Herald technology editor Chris Keall lays out the key asks from the tech sector in his pre-Budget piece today. They include:
An AI strategy with some funded initiatives to support it and potential for AI regulations to put in place guard rails that will give businesses certainty as they adopt the technology.
A boost for rural broadband initiatives to address the lingering digital divide between those in urban areas able to access the ultrafast broadband network and 5G networks, and those on reduced speeds and experiencing patchy coverage in rural areas.
A $500 million top-up to the Government’s Elevate Fund for start-up investment, which many in the tech sector see as crucial to stimulating additional investment from venture capital firms.
Changes to tax rules applicable to employee stock ownership plans (esops) so that these schemes are more attractive in securing top talent in start-ups.
More support for tech via “NZ Inc” initiatives run by various government agencies.
A boost for cybersecurity initiatives, where as Keall points out, Australia is significantly outspending us as a nation on beefing up cyber defences.
A digital services tax to derive revenue from Big Tech companies that use transfer pricing to shift the bulk of their revenue offshore to lower tax jurisdictions.
Here’s what I think we may see in Budget 2024 that will be tech-related.
Some modest funding for AI-related initiatives - Work is going on, led by MBIE to develop a framework for the use of AI across government, but there also needs to be some critical mass given to industry-based efforts to encourage responsible uptake of AI - akin to Australia’s National AI Centre run out of the CSIRO. Minister of Science, Technology and Innovation, Judith Collins, is a passionate proponent of AI, so will be advocating hard for something in the budget to advance this area in the coming year.
Space industry - This is Collins’ other pet interest and a key area where she wants to see expansion. National released a policy to boost the aerospace industry in the run-up to the election, but one that was largely devoid of funding initiatives. But I’d expect to see a modest budget allocation to advance projects such as establishing dedicated testing zones for space and aerospace, in addition to the site at Kaitorete near Christchurch.
There could well be progress on esops, given it was a top priority for the tech sector. But It would come in the form of deferred tax payments on those schemes, so no new money, just a temporary tax holiday so that beneficiaries of those schemes pay tax on realised gains, rather than paying tax upfront when they enter an esop scheme.
Cybersecurity - the Government will have to do something here to support its recent reorganisation of CERT NZ, the growing threats to critical infrastructure and the yawning gap between spending here and in other Five Eyes countries. I’m thinking low tens of millions over several years to beef up threat detection efforts, the malware free network, and cyber skills.
NZ Inc and tech programmes - With the seven industry transformation plans put on ice with no additional spending committed beyond June 30, the Government has to do something to replace these, even if its a fraction of the commitment Labour made in areas like agri-tech, advanced manufacturing and the digital space. I’m hearing that a coherent strategy for the future of this work, essentially National’s plan for the future of the digital strategy won’t emerge until after the budget, August at the earliest. But there will need to be some allocations made to sustain activity through this transition year, if only to keep some of those teams and successful initiatives intact until National figures out what to do with them.
Funding for IT projects - This is always hard to predict as government agencies go cap in hand behind the scenes asking for money for urgently needed tech infrastructure investment. I’d expect to see a few projects of this kind picking up additional funding due to inflation or additional requirements.
Slim pickings for tech
So there it is - predictions that amount to a barebones budget for anything tech-related. But there’s no point spending money until the Government has a coherent plan to roll out in the digital space. For instance, as IT Professionals NZ chief executive Vic MacLennan pointed out last week on Tech Blog, investment in domestic training in digital skills declined 33% between 2010 and 2023. That’s an area that received some attention in the Digital ITP and needs ongoing government effort to increase investment and a coherent approach to building the domestic tech skills pipeline.
Judith Collins is very interested in efforts around “digitising government”, and this is actually one of her ministerial portfolios. We should expect some funding earmarked for key initiatives in this area, but probably for future budgets. A digital driver’s licence may well be one of the first to be explored.
Further down the track, the Government plans to establish a new biotechnology regulator and overhaul legislation to make it easier for companies and scientific institutions to undertake research using cutting-edge gene editing technologies, and to release GMOs in New Zealand commercially. Setting up a new regulator will require significant funding, but amendments to the Hazardous Substances and New Organisms Act will be required first, so I expect an allocation in the 2025 or even 2026 budget.
