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Australian budget must drive innovative economy and boost business confidence

Australia’s federal budget must clearly map out a cohesive policy strategy that continues to build on the nation’s innovative capacity and encourages greater capital investment across the business sector, according to the Australian Private Equity & Venture Capital Association Limited (AVCAL). 

“The federal budget plays a critically important role in laying out a plan for the future of our nation,” says AVCAL’s Chief Executive, Yasser El-Ansary. “We have an unprecedented opportunity right now to pivot our economy towards a much greater focus on high technology and high innovation industries, which have the potential to catalyse significant new employment opportunities.
 
“In Australia we currently invest less than AUD5 per capita in early stage business. That compares with countries like the United States and Israel which already invest well over AUS100 per capita in their high growth potential businesses. That difference tells us we have a lot of catching up to do – and not much time to do it.”

In its pre-budget submission for this year, AVCAL identified a range of specific policy initiatives that it recommended the government to adopt as part of preparing this year’s budget. Some of the specific policy proposals included: 

• Reforming the venture capital limited partnership tax rules to encourage greater domestic investment into high growth potential Australian businesses, and adopting recommendations from the Board of Taxation to improve the thin capitalisation and collective investment vehicles regimes. 

• Changing the Significant Investor Visa Programme rules to require an allocated component of the capital to flow into venture capital funds which invest in Australian businesses. 

• Allowing small businesses with research-intensive activities to claim R&D tax credits on a quarterly (rather than annual) basis to ease cash flow pressures. 

• Ensuring that the new Medical Research Future Fund adopts, as part of its investment mandate, a specific focus on translation and commercialisation of medical research outcomes. 

• Implementing an effective equity crowdfunding regulatory framework that balances the potential economic opportunities for entrepreneurs against consumer safeguards for those investing in startups. 

“The budget parameters will confirm that the Australian economy is vulnerable to the effects of global markets and low levels of business and consumer confidence. So what this budget should be doing is putting in place policies  that encourage businesses to invest in capacity-enhancing resources and new technologies,” says El-Ansary. 

At the moment, private equity and venture capital are invested in just over 500 Australian businesses across a wide array of industry sectors. The number of businesses estimated to require private capital in order to unlock significant growth and expansion opportunities exceeds 30,000. 

“If we put in place the right policies that encourage greater domestic and offshore investment, we stand a good chance of seeing a major pickup in economic activity and new employment over the next few years – that’s precisely the reason why the federal budget is such an important ingredient in rebuilding consumer and business confidence in our future,” says El-Ansary. 

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