Australian Industry Group calls for withdrawal of R&D changes, export funding in pre-budget submission

The Federal Government should increase funding for new skills and education, abandon changes to the R&D tax credit and provide a further $200 million for export market development grants, the Australian Industry Group has said in its pre-budget submission.

Chief executive Heather Ridout has said in the submission that the Government must make the most of the recovery and strengthen its financial standing, while also placing a higher priority of investment to spur economic growth.

The AIG has proposed changes in major areas including skills and education, R&D reform, manufacturing assistance and help for SMEs looking to introduce more sustainable businesses practices.

Among the proposals for education, the AIG says an additional $50 million should be given to the Enterprise Based Productivity Places Program during 2010-11, along with more support for apprenticeship commencements based on the “kick start” model.

The Government should also introduce funding support to up-skill existing workers in skills “for sustainability” through a new program, along with more support for industry engagement with higher education and an expansion of vocational education and training in schools.

Ridout also addressed the Government’s proposed changes to the R&D grant, which would see companies be forced to demonstrate that practices are both “innovative” and “risky”. Currently, only one of these tests must be met.

The AIG recommended the proposed restrictions be put aside in favour of the current regulations, and that the Government should examine and make available modelling of the impact of the proposed changes.

“To meet the revenue neutral constraint imposed by the Government, any shortfall net of the real impact of the removal of the 175% tax concession, more precisely targeted at areas of inappropriate claims should be developed,” the submission stated.

However, the Government is reportedly considering changes to the proposed laws after consulting with industry groups.

Other proposals put forward by the AIG include:

• An allocation of $200 million per year for the Export Market Development Grant project.
• Ongoing support for the network of TradeStart Export Advisers, who regularly assist SMEs.
• Additional funding for the Global Opportunities Pilot Program run by AusTrade. The AIG has also proposed an expansion of this plan.
• More programs for providing information and energy efficiency funds for businesses.
• The introduction of accelerated depreciation for capital investments related to energy efficiency and greenhouse gas reduction.

Ridout said in the submission the AIG is calling for measures that will help businesses reduce emissions and ensure good results, and therefore urges the Government not to withdraw stimulus too hastily.

“It is now clear that an encouraging recovery is underway across the economy. AIG’s submission is informed by our CEO survey, Industry in Recovery Mode in 2010, prepared in partnership with Deloitte.”

“In framing the Budget, therefore, the Government should be cautious about calls to accelerate the planned withdrawal of fiscal stimulus. The challenge now is to strengthen the recovery rather than run the risk of undermining it by further reducing the public stimulus to demand.”

Additionally, Ridout said that reducing the deficit as the economy recovers and limited Government spending are solid goals, but that more priority should be placed on investing in long-term growth.

“The importance of making investments that boost productivity and workforce participation was recently highlighted with the release of the 2010 Intergenerational Report.”

“The importance of these investments is particularly relevant for businesses in non-mining, trade-exposed industries such as manufacturing, tourism, education and agriculture that are exposed to the strong dollar and pressures on interest rates as they compete with the booming minerals sector in capital and labour markets.”