Boring budgets best for tech

I am beginning to wonder whether boring budgets are best for the tech sector and the wider economy.
Written by Darren Greenwood, Contributor

There's nothing like exciting government interventions to make the headlines, but the question is, how effective are they?

I say this as I note that both New Zealand and Australia have had their budgets declared in the past week.

They presented a nice example of compare and contrast, along with claims that despite our earthquakes and lack of a mining boom, New Zealand might be in a better position financially than Australia.

As spendthrift Australia finally discovers prudence, with it having to cut the Budget for its flagship National Broadband Network (NBN), New Zealand is pressing ahead as before with our Ultra-Fast Broadband (UFB) equivalent, and even found extra cash for science and innovation.

It rejigged the various grant schemes, and raised the prospect of tax breaks for R&D — something of a u-turn, considering the National-led government abolished them after it came to power in 2008.

The new programs also allow the government to claw back support when grant recipients are sold to overseas interests, something that is only fair, and an issue that has caused controversy in the past.

The moves to encourage investment in R&D are welcome, but are they enough?

Rod Drury, the chief executive of accounting software company Xero, came up with his own "alternative Budget".

In it, he called for government funding for a Trans-Tasman fibre cable, a merging of the IT and broadcasting ministerial portfolios, a provincial call centres initiative, an internet privacy zone, allowing extra IT-skilled immigrants, and other initiatives.

The government can always do more to help the tech sector, but the road to hell is always paved with good intentions.

Rod Drury was behind the Pacific Fibre project, but Telecom NZ and Vodafone are now pushing ahead with their own cable, so government intervention is not needed.

The government's pension funds actually looked at the Pacific Fibre proposal, and found that the business case did not stack up.

And as I said before, Rod Drury and others had plenty of opportunity to put their money where their mouths are, instead of putting their wealthy hands into the pockets of hard-pressed New Zealanders.

With government grants, there always remains the risk of corruption, as governments support their supporters with taxpayer funds. This is a common problem in the US, it seems, though I have heard similar allegations also made regarding the UK and its government's support for "green" energy.

In New Zealand, we see that without much government support, though targeted grants at innovation are increasing, a policy of what you might call benign neglect seems to be working.

Should the government intervene radically, I doubt the IT sector would be able to cope with any sudden upsurge in demand for IT staff, for example.

In previous years, I have felt that our National-led government was too timid in tackling the "Decade of Deficits" that it inherited from Helen Clark, akin to what Tony Abbott faces if elected this year.

But as the IMF and others are discovering, New Zealand's economy is ticking along quite nicely, and so is its tech sector, as I have reported many times before.

There hasn't been any dramatic initiatives, but boring seems to be working, despite uncertain times globally.

Rod Drury and others are right in raising issues and coming up with proposals. Like this month's software patent announcement, they sometimes become government policy.

Rod Drury won't get his government-supported Trans-Tasman cable, but he can take heart at the increasing support that government is giving to science and innovation, with software a major beneficiary.

As his billion-dollar company, Xero, has yet to make a profit, its tax burden will be nothing. Despite his own burgeoning personal wealth, Xero has benefited from government grants.

Neither Finance Minister Bill English nor his budgets are exciting, but they have put New Zealand back on the right track, and we have a pragmatic government still open to ideas on how to make the economic boat go faster, along with how tech might power it.

Editorial standards