Budget 2012: IT money, but no vision

There is definitely money in the Budget's IT industry provisions for savvy companies, according to analysts — but there is also nothing there to encourage the growth of the industry.
Written by Suzanne Tindal, Contributor

There is definitely money in the Budget's IT industry provisions for savvy companies, according to analysts — but there is also nothing there to encourage the growth of the industry.

Ovum analyst Kevin Noonan said that despite the efficiency dividend, which was increased from 1.5 per cent to 4 per cent, and capital expenditure cuts, which will see government departments cut around 3000 staff and axe spending on things like software upgrades and purchases, there are opportunities for those in the IT industry who know where to look.

"Broad estimates would put the size of IT project money at least equalling projects coming out of the 2011-12 Budget. That's a lot of money. Tax, health and welfare did particularly well, but there was a good smattering of money going to other agencies," he said.

Meanwhile, although the staff cuts will reduce the number of seats using technology, Noonan highlighted the fact that the government is focused on productivity, which is often IT enabled. For example, additional funding has been announced for SmartGate, which aims to improve the productivity of Customs. There is also money to be had in videoconferencing and telehealth productivity measures.

IBRS analyst Guy Cranswick said that some of the job cuts might be achieved by the re-prioritisation of projects. "We shall be seeing more shuffling about and reallocation of resources for some months, which could lead to unsettled times," he said.

Dustin Kahoe, associate research director for IDC, said that no departments have a good handle on how the budget measures will affect them just yet, but added that the Budget will likely slow down decision making and defer projects. Instead of upgrading a whole department to a technology in one to two years, a refresh might be dragged out over a longer time period, he said.

There will be lots of small projects and no big bangs, while checkpoints for procurement will become more numerous and onerous, he believes.

Telsyte analyst Rodney Gedda said that there is definitely money to be found, for example, in manufacturing and health initiatives, or with the Bureau of Meteorology, which will be trialling online advertising.

In health, $233.7 million has been allocated to continue the roll-out of the personally controlled e-heath record (PCEHR) scheme


The Australian Information Industry Association (AIIA) praised this investment in a release today, saying that the project will drive productivity gains.

Chair of the AIIA National eHealth Taskforce, Suzanne Roche, said: "These moves give the sector certainty about ongoing support for a complex reform program that starts on 1 July, and will take many years. Clear synergies with the potential for smart health applications on the back of the National Broadband Network (NBN) will be key to the success of health reform in the future.

"Privacy is a key to the success of PCEHR, but we need to see details of how the [Office of the Information Commissioner] will maintain safeguards, and what impact that might have on the efficacy of e-records."

The Australian Medical Association was less effusive with its praise, disliking the lack of incentives for doctors to jump onto the program.

It also lambasted the decision to make doctors' eligibility for electronic Practice Incentive payments contingent on them joining the PCEHR program. The electronic Practice Incentives Program provides doctors with funds for meeting e-health requirements, including the usage of secure messaging and public key infrastructure, as well as enabling the electronic access to clinical resources.

"We will challenge this decision. This will be a roadblock to the system working properly," the AMA said in a statement.

Bad for business?

Another budget revelation that affects all industries is the cancellation of the government's promised 1 per cent tax cut for businesses, something that has displeased Internet Industry Association (IIA) chairman Bruce Linn.

"Business in general was shocked and disappointed to see the dropping of the promised company tax cut," he said.

Many wouldn't think that such a reduction would have been significant, but it would, he said, especially "at a time that companies outside the mining sector are doing it tough".

Tim Mazzarol, Winthrop professor of entrepreneurship, innovation, marketing and strategy at the University of Western Australia, agreed.

"For small businesses with cash-flow problems caused by the high dollar, declining consumer spending and banks unwilling to pass on interest rate reductions, this reneging on the tax cuts will be a bitter pill," he said. However, he did point to the loss of carry-back initiatives and immediate tax write-offs for assets under $6500 as sweeteners.

The IIA and Australian Computer Society had hoped that funding would be provided for IT training to ease the skills shortage for the digital economy. This funding doesn't seem to have eventuated, with the only mention of IT in the education portfolio being the ongoing Digital Education Revolution.

The IIA chairman said that this is disappointing, given that Asian universities are a growing force. "We're just not going to be able to compete on science and technology," he said.

Another concern with the Budget is the lack of money being spent to grow the IT industry, according to Gedda. Cranswick agreed, lamenting the lack of leadership in this area.

"No one industrial sector benefited, so no one is overtly disadvantaged, but there is no clear signal offered, either," he said.

The lack of vision seems to have unfortunately been the case across the board, according to Warwick McKibbin, director of the Research School of Economics at the ANU College of Business and Economics.

"There are a lot of transfers, which are not investments by the government in the future of the country. It's actually just transferring money to constituencies that traditionally vote for the Labor party. Now, that might be a good idea for them, but I see nothing in this Budget which is about investing in Australia's future," he said.

"It's always responsible during good times to be putting money into savings, so there's nothing wrong with the idea of surplus. The question is what's being spent and what's being cut; and the quality of the spending and the quality of the changes in our revenue base is what's critical here. Most of what I see is not investments in education or capital, but payments to people to spend on anything they want."

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