Posted by: peterhact | August 14, 2012

The Market is flat, companies are closing, but we have a surplus so it’s OK…

The Budget surplus has had a marked effect on the ICT industry in Australia. Many smaller companies who aren’t on panels are eking out a life on any scraps that they can find and keep “under the radar” of the larger organisations. They are fighting for their survival, but the government is far too busy to notice as they chase the working family vote – completely ignoring the singles in the process, never realizing that these people have very long memories come election time.

The income tax threshold has been lifted? great. The income tax rates have also been raised. I got my pay packet last month, all excited, and found I had gained an extra $10. I am not on the average wage, in fact I certain most people aren’t.

I was reading an article that is towing the old line that the government needs to do more with less. Lower budgets, less contractors. What is the end result of this for the economy? Departments won’t touch new technology with a 40 foot barge pole, meaning that they will do more with less, using old technology that has been propped up with maintenance renewals. There is no growth. There is no innovation, there are no prospects for new companies coming into the market with a great idea that potentially will solve several problems currently faced by end users.

Where is the support for new businesses in Australia? If you have a great idea, put it out into the market and fail, does the government notice? do they care? Whatever happened to the idea that we promote research and development that lifts our country up to be a leader in the ICT industry, not accept other countries and their own companies’ ideas?

There has been discussion that it will all get better in september. Personally, I feel that it will get better after the next election, where we will either see a new government or an old one that has had a damn good shaking.

We have great R&D exposure here, with ideas that are being developed by specific government departments. How do the budget cuts impact their flexibility? We need diverse approaches to the same ICT problem from many different angles, not all from the same sources as it seems to be currently.

If I was a politician, either the ALP or the Coalition, I would take the surplus and look closely at where it took budgets away from certain departments, then reinstate them. We were sheltered by the Stimulus Package during the GFC, but there were long term ramifications. Companies that survived the GFC, not just in the ICT industry, but across the segments are now closing. The Automotive sector has taken a pounding. Construction, Transport and Retail have fared no better.  One small step to get this country back on its feet with a strong economy and more jobs is to release funds to government – if the departments can buy, then every other segment will benefit – there is a flow on effect if ICT spend increases:

Companies grow. Companies are able to increase their size if there is money available to do so. This may mean relocation, in some instances, if the increase is substantial. They may commission a new building to house the staff sizes that they have gained. The benefit is a lower unemployment rate, and an injection of disposable incomes into the other sectors.

Disposable incomes rise. If a person is earning more money, they have more to spend. They can buy a new car, they can renovate their house, or buy a new house. The current housing situation is alleviated by additional properties being built. New cars are produced. Farmers gain income from crops, it is a complete reinvention of the economy.

All segments gain positive growth. If disposable incomes are up, people can buy things from retailers, new cars, new houses, items to fit out the new houses and the economy becomes more stronger with each new purchase. Government can become more technologically advanced, Companies stop the free fall into administration, and the country becomes stronger with respect to unemployment rates, income tax, GST and other forms of revenue.

To say that this is the magic bullet is a big leap, but a surplus budget is not the most effective way to ensure that the country is stable and profitable. The best way to make money is to spend money. In the case of the government, bailouts for companies are not sustainable. Creating a long term solution that prevents rises in unemployment numbers, promotes growth and creates wealth in the population is a better approach. Tough budgets do not promote growth in industry, they promote critical failures in the companies and the employees that the government relies on for its source of income.

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Responses

  1. Hi Pete

    I agree with you, the old adage of “you have to spend money to make money” is as good today as it was when first coined. The problem is that the people who control the purse strings – government departments and politicians have no understanding of the real world.

    In addition the idea that Government deprtments have to be run as a business is a load of crudd. If a government department was run under that context then half of the public servants would lose thier jobs. If we want a government department to be run that way it is about time that we started bringing in professional business people to fill the management roles of these departments not people who have been indoctrinated in the PS mentality.

    I would like to see that.

    I made a comment a long time ago when the money was being doled out for the GFC about the lack of involvement from the government sector. Most, if not all, government department employees at the time were very secure in their jobs but did we see an increase in private spending from them? Just goes to show the caliber of the PS. and who they really worry about.

    Thanks

    P.S. Great article


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