Investing in Technology and Innovation is the Key to Australia’s Future

Investing in Technology and Innovation is the Key to Australia’s Future

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When will the Australian government get the message?

The message I’m talking about is you need to invest in and support Australia’s start-up community.

In April last year Google Australia commissioned PWC to look into the Aussie tech scene. They released a paper, The Startup Economy, based on their findings.

But the push to get this all done and into the public domain came from a group of tech entrepreneurs who decided enough was enough.

The theme behind Google’s paper was ‘How to support tech startups and accelerate innovation.

In effect Google was doing the work of the government. All that Canberra had to do was listen and take action.

In the PWC/Google paper this was the biggest key finding:

The Australian tech startup sector has the potential to contribute $109 billion or 4% of GDP to the Australian economy and 540,000 jobs by 2033 with a concerted effort from entrepreneurs, educators, the government and corporate Australia.

Another key finding was jobs create jobs. Specifically that high tech jobs and innovation help to create new jobs that previously never existed. This is what happens when smart people think of better and new ways to do things.

In his book, The New Geography of Jobs, Enrico Moretti says, ‘In essence, a high tech job is more than a job… Research shows for each high tech job, five additional jobs are created outside the high tech sector.

What that means is when you invest in innovation it pays you back multiple times through jobs and economic activity.

In 2012, IBM also commissioned a paper titled A snapshot of Australia’s Digital Future to 2050.

In the paper IBM measured a number of industries. The point was to discover what tech startups today were focused on versus the potential those industries would have to GDP in 2050. These were the outcomes from that study.

The conclusion here is currently the majority of startups are in information media and telecommunications. And by majority, we mean over 75%..

But in terms of actual GDP in 2050, health care and social assistance will be the highest contributing industry. Yet right now there’s little to no support for startups working in this space. And there’s not many startups focused on this sector.

Most people would think mining or banking and finance would be the biggest contributors to future GDP. But based on this study, that’s not how it’ll play out.

If you’re wondering how health care can possibly be the biggest contributor to GDP by 2050, I’ll tell you.

Ageing Population is a Problem if you do Nothing Innovative to Solve it

You only need to look at the recent comments from the Treasurer Joe Hockey. In Washington on Wednesday Hockey said, ‘In fact the IMF fiscal report released just a few hours ago identified that Australia’s increased healthcare and pension spending alone, based on current settings, would mean an extra $93 billion of government spending per annum by 2030.
 
So what’s the government’s answer to these problems? Well they’re likely going to try and lift the retirement ago to 70. Added to that they’re looking at including the family home in assessing the eligibility for aged pension.

You see Australia has a problem. An ageing population that’s going to have increasing healthcare needs over the next 40 years. And the government knows this. Hockey even went on to say, ‘We will need to improve competition and efficiency in the delivery of healthcare and we need to ensure that access to the pension system is prioritised for those most vulnerable.

It’s not like the government doesn’t know what the problem is. But considering two years ago IBM identified this requirement. And then last year Google also backed this up with a viable strategy to combat the problem.

But what has the government done? (And I’m not playing favourites here because we’ve seen two governments miss the point).

I’ll tell you what they’ve done…nothing.

Speaking in relation to the upcoming budget Hockey went on to say, ‘If we want to maintain and improve our quality of life, then all of us, without exclusion, all of us need to help do the heavy lifting.

Well two years have flown by, and still the Australian government refuses to support innovation.

Entrepreneurs will just do it Themselves

Now as mentioned at the top, the Google report was thanks to a group of Aussie entrepreneurs. Together they decided they, not government, could do something to support the Aussie tech scene.

StartupAUS formed in late 2012. But it really came into being in March 2013 when over 50 people from Australia’s startup community decided to take some action and figure out a roadmap for an Australian tech ecosystem.

Now this kind of thing isn’t uncommon in the technology world. You see entrepreneurs realise government talks a big game but does very little to back it up. So in order to get things done and move things forward, entrepreneurs band together and do it themselves.

They do this because they are entrepreneurs. They know they can mobilise, and action plans faster and more efficiently than any government can. That’s the purpose of StartupAUS.

They say, ‘We believe a strong homegrown tech sector is vital to future Australian jobs and wealth. But getting there will require a national imperative to create the right environment, with a supportive culture and more entrepreneurs with the right skills.

Mr Hockey and Mr Abbott, it’s not a difficult problem to solve. If you want to shore up the future of the country you need to actually put some resources into the fledgling Aussie startup community.

The talent is there, the drive, the focus and the ambition is all there. But without national support great companies that turn into multi-billion dollar companies will move offshore.

You only need to look at some of Australia’s finest tech startups that are making waves around the world.

There’s Atlassian, Bigcommerce, Freelancer, 99Designs, 99Dresses and Shoes of Prey.

Atlassian is valued at over $3 billion and is looking to take the company offshore. I’m sure if the Aussie environment suited operations they’d stick around. But right now why would anyone want to?

With the government warning people and business that there’s some ‘heavy lifting’ to be done if I was Atlassian I’d pack up shop too. You can’t blame them.

Countries such as the UK and US are much more accommodating and supportive of tech companies. They know these are the companies that will drive economies in the future and they are willing to support them.

Also when you look at Bigcommerce, 99Designs and the others mentioned, the bulk of their funding comes from overseas investors. US Venture capital funds that understand the way these companies work and understand their potential are the ones pumping money into their operations.

It’s not too late for Australia to turn things around. Some initiative and some forward thinking can start to set us up for the future.

But what the country needs is a genuine innovation policy. However for decades, no government has had one.

The task will fall to private industry and organisations like StartupAUS. They will be the ones that grab the reins to help drive the country forward. And if we’re lucky we’ll get companies like Freelancer.com that stick around against all odds and bring great long-term benefit to the country.

Regards,
Sam Volkering+
Editor, Tech Insider

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Sam Volkering

Sam is Editor for Money Morning and it’s small-cap and technology analyst. He spends his time hunting down the most exciting stocks on the planets, whether they’re potential-packed volatile small-caps or tech firms transforming our future through cutting-edge technologies. You can find more of Sam’s work over at Australian Small-Cap Investigator, where he shares the best small-cap stocks he finds on the ASX, or at Revolutionary Tech Investor where he reveals the latest breakthrough tech investment he’s discovered. If you’d like to more about Sam’s financial world view and investing philosophy then join him on Google+. It’s where he shares investment insight, commentary and ideas that he can’t always fit into his regular Money Morning essays.

Sam Volkering is Editor for Money Morning and its small-cap and technology analyst.

He’s not interested in boring blue-chip stocks. He’s after Australia’s rising stars — companies whose shares trade for cents on the dollar — and are often shunned by those in the financial services industry. His mission is to make you big money, from small stocks.

If you’d like to learn about the specific companies Sam is recommending you buy for turbo-charged stock returns, take a 30-day trial of his small-cap investment advisory Australian Small-Cap Investigator here.But that’s not where Sam’s talents end. From discovering the Apple 2e and Macintosh in the mid-80s, to the rise and fall of the Mini Disc in the 90s…to building internet apps in the 00s…Sam is an amazing talent at finding new, cutting edge technologies and translating that research into how the future will look — and where the opportunities lie.It’s his job to trawl the world to find, analyse, research and — in the right situation — recommend investments in the world’s most innovative and technologically advanced companies.He recommends the best ones he finds in his breakthrough technology investment service Revolutionary Tech Investor.This revolutionary investment advisory is dedicated to finding the best ways to profit from technological developments across the globe. If the best action is in Australia, Sam will find it. If it’s in Silicon Valley, Frankfurt or Tokyo, Sam will find it there too.To find out more about how Revolutionary Tech Investor can help you profit from breaking developments in the tech world click here to take a 30-day no-obligation trial today.

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