Keeping people in jobs and trades with higher skills and keeping them productive is the key to social and economic harmony. As the Government starts work on Stimulus 3, there are a few things to consider:
Economic nationalism (or regionalism) is a new norm
Brand Switzerland has long been on this path. The EC (and its State members) and the UK are moving quickly pledging billions to rebuild or develop key strategic supply chains and become industry fit. Australia continues to fall well behind these benchmarks not for lack of intellectual capacity but in our approach to applied research.
Industry policy needs a logical reset
Governments has one main function – access to unlimited funding. It has one major failing – program effectiveness and Federal coordination. Although each State has sector strategies, they are piecemeal – neither well defined, coordinated or collectively funded. Signals to industry to develop value-adding manufacture are weak. Program effectiveness is poorly measured and reported. Industry policy needs a big budget (triple what it is today) and a senior cabinet post.
Business support needs better targeting, beyond liquidity
Apart from travel, transport and cafes etc, the big layoffs are in businesses employing 20+ people where the impact on revenues, including debtors and deferred revenue, is poorly understood. Businesses have optimised for normal economic conditions, not dislocation. So the remedy must be temporarily disproportionate to retain the skills ready for the rebound. This could include the following short-term measures for FY2020 – 2023 –
- Skills dislocation and reset loan – a $1M – $10M repayable no interest loan over 3 years at the RBA cash rate + 1.0% to cover bank administration costs. Loans to be paid down in instalments per annum via corporate tax returns in FY2021-2023.
- Innovation funding – Temporary 50% increase (from 43.5% to 63.5%) in the R&D tax rebate for FY2020 for applicants with group turnover <$20M who are in loss.
- Start-up funding – Reintroduce the SIV program for FY 2021 and FY2022. Expand eligible applicants for receipt of SIV funds. This should include Industry Growth Centres.
- HNW Investor funding – Temporary 100% increase in ESIC tax benefit (from 20% to 40%) and relax ESIC eligibility for FY2020 and FY2021.
- Sector leadership – double funding for Industry Growth Centres that can demonstrate strong industry support and proof of ROI in FY2021 and 2022 . Centralise companion grant programs under their aegis. For example, expand the Manufacturing Modernisation Grant Program currently at $50M to $200M and coordinate with AMGC. Mandate that the MRFF approve medical research and health infrastructure projects worth $500M for 3 yeas to FY2023 and coordinate with MtpConnect.
- Infrastructure projects – mandate the Future Fund double its investment in Australian infrastructure and industry listed and unlisted portfolio assets by FY2023.
- State Government coordination – States agree to match Federal business stimulus on a 1:3 basis for FY2021 and 2022. States consolidate and standardise sector funding programs in FY2021 to remove confusion and streamline access for businesses.
These measures can be delivered quickly and easily to businesses and investors through existing program infrastructure. They blend Government short-term support with a longer-term option to advance industry policy.