Budget 2020: Millions of dollars to go towards the digital economy

The government wants to be a leading digital economy by 2030.

The 2020-21 Budget was delivered on Tuesday night by Federal Treasurer Josh Frydenberg with a focus on economic recovery. The plan detailed various funding measures to increase jobs, cut taxes and support businesses. A part of these measures went towards supporting and developing Australia's digital economy, which covers the innovation and tech sector.

Frydenberg said there is a "monumental task ahead", but that "we owe it to the next generation to ensure a strong economy so that their lives are filled with the same opportunities and possibilities we have enjoyed".

Growing the digital economy

The Budget measures introduced centre on making Australia a leading digital economy by 2030. The digital economy is widespread and includes technology companies, fintechs and regtechs. According to Budget documents, the government wants "to improve productivity, income growth and jobs by supporting the adoption of digital technologies by Australian businesses".

Consumer Data Right

The Consumer Data Right (CDR) was first announced in November 2017 and has developed significantly since then. The CDR gives consumers more control over the data held on them by companies so they can benefit from better rates and fees, new products and more.

Financial services was the first sector CDR was introduced to in the form of open banking. Under the open banking framework, consumers can request their financial data to be shared with an accredited organisation. Open banking officially started in July 2020 with the Big Four banks allowing consumers to request that their data be sent to other accredited companies. Other banks and financial institutions will be taking part by July 2021.

As part of the Budget, $28.6 million will go towards the implementation of CDR in the energy sector and commence the rollout. Once this happens, consumers will be able to request their own data from their energy company. An "open energy" framework will increase competition and allow consumers to easily switch products, find better deals and sign up to new services in the energy sector.

Dirk Steller, managing partner and founder of fintech venture capital firm Seed Space, said the expansion of CDR is an excellent move.

"The Consumer Data Right and Open Banking is an important initiative that serves up plenty of advantages for Australian customers and will allow fintech entrants to provide new and improved products by offering data-driven insights and more compelling, tailored and personalised offerings for Australians, all of which will drive economic growth and improved customer outcomes."

Support for fintech startups

The budget measures also include support for fintech startups that are looking to expand overseas. There will be an investment of $9.6 million over four years to provide better support for fintech startups to set up in international markets through the fintech bridge program. This measure also aims to encourage foreign investment and job creation in Australia.

Steller has welcomed the measure, calling it a "key driver of success".

"[The measure] is a welcome initiative that builds on the government's ongoing multilateral fintech expansion initiatives that are all aimed at helping Australian fintechs grow and scale into key offshore markets such as Europe and the UK, as well as learning from international counterparts to ensure our homegrown fintechs are operating in line with global best practice."

Research and development

Research and development was also a focus in the budget, with Frydenberg calling it "critical to Australia's future economic prosperity".

The Budget provides $2 billion in extra research and development incentives and also removes the $4 million cap on the Research and Development Tax Incentive (RDTI) refunds. The changes come into effect from July 2021.

CEO of FinTech Australia Rebecca Schot-Guppy said the government's stance towards R&D was perhaps its biggest surprise.

"The policy is important for fintechs' capital runway, particularly at their earlier stages, and the changes will no doubt support their growth," she said.

"In addition, the increased R&D spend will ensure that new innovative businesses come into our economy which will help lead our recovery. Our only concern is that the reform comes into effect on July 1, 2021. For us to have the best chance of supporting the sector through this pandemic, it needs to be introduced now."

"It's encouraging to see a $2 billion injection in R&D incentives," said Mandeep Sodhi, CEO and founder of Effi. "The mortgage broking and the mortgage sector overall is rapidly digitising and this program will only help support its disruption and drive efficiency in the mortgage market. However, there's still no support for software-based R&D activities which is going to drive the next phase of growth for Australia."

Payments

Prime Minister Scott Morrison said in a budget briefing on 29 September that Australia has "arguably the most advanced real-time payments system in the world". Through the New Payments Platform (NPP), payments are able to be made instantaneously no matter which bank people are with.

However, he said for this to be implemented across Australia, businesses need to be online. To help businesses to be digital-ready, $3 million will be spent over 4 years to develop a Digital Readiness Assessment tool to help businesses assess their digital maturity and improve it. A further $2.5 million will be spent to support a Digital Skills Finder program to help small businesses and workers to find digital skills training courses.

The government is also committing to becoming digital-first. It will spend $256.6 million over 2 years to develop and expand Digital Identity for better access to government services. $3.6 million will also be spent to facilitate the adoption of electronic invoicing, as well as explore options for mandatory electronic invoicing.

$0.5 million throughout 2020-21 will also be put towards a review of the governance and regulation of Australia's payment system.

Supporting women

This budget has a focus on helping women, who have been disproportionately affected by the economic turndown caused by COVID-19. As part of the budget, a second Women's Economic Security Package was released which includes $240 million in measures.

To increase the number of co-funded grants and women-founded startups, the government will provide $35.9 million over five years. This measure also provides access to expert mentoring and advice for female entrepreneurs.

The government has also announced $25.1 million over five years to set up a cadetship for women in Science, Technology, Engineering and Maths (STEM). The program will support 500 women in STEM industries to complete an advanced diploma.

Schot-Guppy has applauded these government measures.

"Women continue to be underrepresented in fintech," she said. "Up until now, this has been left to the market to fix, and as a result progress has been slow. We're hoping this measure towards diversity will have substantial social and commercial outcomes both for the fintech industry and for Australia."

CEO of regulation technology provider Skyjed Leica Ison welcomed the measures to employ more women.

"As a female tech founder of an emerging RegTech provider of a digital product governance platform, these initiatives are refreshing and will certainly drive growth in our digital economy," she said.