As we approach the federal budget, predictions, expectations and hopes are rising for Australians struggling with the escalating cost of living. While some relief is likely, the government has already ruled out a big cash splash.
The business impact of the cost of living pressures is also starting to ripple through the SME landscape, whether it’s customer frequency dropping or the costs of doing business rising coupled with downward price pressure from competitors.
SMEs constitute a significant portion of the Australian economy (98%) and face unique challenges due to their limited financial resources compared to larger corporations. There’s no doubt the budget should address their needs, but how would we like to see the government do this in 2024?
Here is a 2024 federal budget ‘wishlist’ that would help SMEs to grow:
There’s a strong correlation between capital investment and future economic performance. During the COVID pandemic, there were tax breaks on capital investment to ensure the private sector stayed robust and didn’t turn off the taps to conserve cash.
Alongside the Future Made in Australia initiative, we need ongoing, innovative forms of government intervention to support SMEs. This support could go beyond direct funding, including improvements to current initiatives. For example, Belgium’s approach to R&D tax incentives where credits are provided earlier in the process, encourages immediate investment in innovation, with tax implications if the money isn’t spent by the end of the financial year. This approach has seen a higher level of innovation output from firms in Belgium compared to other jurisdictions where R&D incentives/credits are deferred. So, by slightly adjusting the timing in which R&D incentives are delivered, the Australian Government could drive an increase in innovation, leading to better productivity and outcomes.
Support initiatives such as the Industry Growth Program should be available to more knowledge-based businesses. This will allow the country to better leverage the innovation ecosystem as an exportable commodity. For example, providing knowledge-based SMEs with access to one of the world’s leading AI and machine learning research institutes right here at the University of Adelaide (AIML) to drive innovation, and consequent productivity gains. This would also bolster the impact of the state and federal government’s already strong commitment to developing Australia’s innovation ecosystem.
The statistics around investment in women-led and First Nations businesses are still disappointing. Female founders receive a fraction of the investment that male founders do. Many First Nations businesses face additional challenges, such as not having a strong enough balance sheet to raise finance against.
Providing government securitisation for certain categories of businesses or types of financial instruments would help these enterprises grow out of structural disadvantage. This would ultimately create more inclusion, equality, and longitudinal gains for many generations of communities and SME owners to come.
One of the issues businesses are struggling with, particularly in regional areas, is the lag between identifying the skill gaps for SMEs and acquiring skilled migrants to fill them.
For example, if 15,000 skilled migrants in areas such as medical professions, engineering and trades were placed in regional South Australia tomorrow, they would be snapped up. The problem is the time it takes to process migrants to cover skill shortages due to the multiple steps needed for their visas to be approved. Start with the time-consuming collection of skills demand data to roll into immigration intake quotas, then add another 12 to 18 months to process visa applications of skilled migrants, followed by another year on average for people to arrive. All of this leads to today’s job needs being filled in three to four years’ time.
To address skill gaps with the urgency they require, the budget should invest in the use of AI and machine intelligence to make faster, more accurate projections about future skills demand, assist with the processing of applications, and act on them immediately.
SMEs will need support implementing upcoming ESG reporting standards. While these changes will only kick off in July 2024 for the big end of town, they will eventually be cascaded to SMEs. Businesses that have more than 100 employees and $25 million EOFY consolidated gross assets (or $50 million consolidated revenue) will report on Scope 1, 2 and 3 emissions as part of their business activities from July 2027. SMEs already struggling to adapt to a steady stream of regulatory changes need support to prepare for ESG reporting standards now.
This would help resolve a huge ESG knowledge and skills gap for many companies. I certainly don’t see my local coffee shop prepped for their future ESG reporting obligations. It would be prudent for the government to make an investment call to provide ESG training for SMEs ahead of time to aid less-resourceful SMEs to prepare. The 2024 federal budget must help SMEs close this knowledge gap and navigate the ESG reporting transition well in advance of the changes becoming reality.
Australia has huge potential for a bright economic future, but more needs to be done in the upcoming 2024 federal budget to fill skills gaps, foster innovation and productivity, ensure equitable access to capital, and prepare SMEs for regulatory changes.
If the budget can fulfil this ‘wishlist’ for SMEs, it will create a more supportive economic environment for small and medium-sized companies that are currently experiencing tough times, providing them with an opportunity to break through these foreseeable challenges and strive for growth. Vitally, given the ubiquitous spread of SMEs in all sectors, a budget with these imperatives will drive growth and innovation across the breadth of the Australian economy, with the benefits felt by all.
Ryan Williams is the director of the Australian Centre for Business Growth, UniSA Business.
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Ryan Williams is the director of, and the Playford Professor of Business Growth at, the Australian Centre for Business Growth, part of UniSA Business. He has two decades of experience as an international executive, strategist and entrepreneur.
