Finance Minister Grant Robertson will need to be on top of his game to land one of the most difficult Budget balancing acts New Zealand has seen for years. Join us live from 2pm for the delivery of Budget 2023 with expert analysis and commentary. Video / NZ Herald
Tech and Budget 2023
20 per cent rebate for the video game industry under a $160 million package
$26.6m to help businesses boost their digital skills gaps and increase women’s participation in the technology sector from 27 per cent to 50 per cent by 2030
$29.9m for horticulture technology
Elevate Venture capital fund topped up with $40.5m to the $300m promised in 2020, no new $300m
$15m for free home internet for 18,000 disadvantaged students
The video game industry has got the tax rebate it’s been lobbying so furiously for - but it’s half the incentive introduced across the Tasman in July.
Budget 2023 includes a 20 per cent rebate for game development studios that meet a minimum $250,000expenditure threshold per year. Individual studios will be able to receive up to $3 million per year in rebate funding, and the $160m scheme will be backdated to April 1, 2023.
Beyond that, it was relatively slim pickings for tech compared to the A$2 billion in new ICT spending in Australia’s Budget announced earlier this month, which included a raft of new e-safety, cybersecurity and AI measures, or an equivalent move to the Aussies’ clampdown on Big Tech profit-shifting. The latter was a particular pain point for NZRise co-founder Don Christie, who said it was “demoralising” for local tech firms there was not more being done to tackle multi-nationals and tax. Christie said he saw nothing in the Budget that built the local tech sector’s resilience.
Earlier, NZ Game Developers Association chairwoman Chelsea Rapp told the Herald that despite the Government touting her industry as New Zealand’s next billion-dollar success story, it was at a “crisis moment” due to the new tax incentives across the Tasman. There was a risk New Zealand firms would relocate across the ditch, and top talent was being lured to Australia.
The Australian scheme, funded to the tune of A$1.2 billion, offers game studios 30 cents back on every dollar they spend developing a new title - with a top-up in Victoria, South Australia and New South Wales taking that to 40 cents or 45 cents on every dollar in Queensland.
‘Elated’
Despite the NZ scheme not going toe-to-toe with the Aussie incentives, Rapp told the Herald shortly after the Budget dropped: “I’m elated. It’s such a relief to see that the Government heard our concerns and made real steps to support an industry that was on the edge of disaster. This will mean that our studios will be able to continue to grow, to compete on a level playing field with the rest of the world, and to become one of New Zealand’s most productive sectors.”
The industry had also been pushing for the New Zealand Screen Production Grant to cover the gaming sector, too. The two fields compete for the same production talent pool. Rapp wants a level playing field. There was no immediate sign the Government had yielded on that front.
NZ Game Developers Association chairwoman Chelsea Rapp.
Stephen Knightly, chief operating officer at Auckland studio Rocketwerkz - maker of the global hit Icarus - was one of those threatening to shift some operations to Australia.
This afternoon, he told the Herald, “This will definitely keep high-tech creative jobs and investment here, rather than flowing across the Tasman. It’s great to see the Government taking tangible action to support not only interactive games, but the wider digital economy too. The Digital Skills package [below] will be really helpful, too.”
He added, “While our 20 per cent rebate doesn’t beat the 30-45 per cent available in Australia, Kiwi game developers back ourselves to be competitive and keep growing.”
The package was enough to keep Rocketwerkz from straying across the Tasman, Knightly said.
‘Dumb’
Support for a gaming rebate wasn’t universal. Earlier, the NZ Initiative’s Eric Crampton said New Zealand should not get into a bidding war with a deeper-pocketed country - but rather lobby Australia to drop its game industry subsidy.
He concentrated his criticism of the rebate announced this afternoon to: “It’s dumb.”
“New Zealand taxpayers will be on the hook for subsidies to the video game sector, like the international film sector, forever, barring a miracle,” the economist said.
“The only winning move in international subsidy games is not to play.”
‘Not opposed, but not enough’
National technology spokeswoman Judith Collins said her party was “not opposed” to the video game rebate.
“It hasn’t been a level playing field for some time. Australia has been raping and pillaging our industry,” Collins told the Herald.
She questioned whether the 20 per cent rebate would be enough to staunch poaching efforts from some Australian states, “especially Queensland, where they’ve been really aggressive”.
“There’s also very little on foreign direct investment or talent.”
The lack of Australian Budget-style cybersecurity, e-safety and AI measures reflected that “the Government just hasn’t put their heads together and done the work”.
Andersen: ‘Strong contributor to GDP’
“We know from looking at advanced economies like Germany, South Korea, Japan and Singapore that the best investments you can make in the future of your economy are in science, skills and infrastructure,” Digital Economy Minister Ginny Andersen said.
Andersen said in 2021, the sector contributed $7 billion towards New Zealand’s GDP and, since 2016, has grown at twice the annual rate of the wider economy.
“Our gaming sector is rapidly growing and is a strong contributor to New Zealand’s GDP – bringing in more than $400 million in revenue in 2022.
“The sector is a creator of high-skill, high-wage jobs – aligning with our vision for a low-emissions, high-wage economy, helping to lift our productivity and wealth.”
In addition to the gaming rebate, the Government earmarked $27m for a Digital Skills package that will be focusing on growing our tech sector workforce under the Digital Technologies Industry Transformation Plan.
Funding will support the development of apprenticeship-like pilot programmes, which will include part-payments for trainee wages, employer support and guidance, and will cover set-up costs for trainees.
Research, Science and Innovation Minister Dr Ayesha Verrall said the Government was also developing new multi-institution hubs to increase collaboration in research and science. The hubs would be backed by a $400m capital investment, Verrall said, with $51m for operations under a plan to make Wellington a science city.
This included fellowships and funding to develop more than 260 future science leaders with $55.2m for research fellowships and training more PhD students.
Hubs will include climate change and disaster resilience; health and pandemic readiness; and technology and innovation.
The Elevate Venture capital fund, operated by Crown agency NZ Growth Capital Partners, was topped up with $40.5m to the $300m promised in 2020.
With the original funds nearly exhausted, and venture capital flagging, there was no word on whether another $300m will be allocated - but the Herald understands a separate announcement could be in the offing from the NZ Super Fund.
The $29.9m for horticulture technology will “support a sector affected by the cyclone to develop more productive ways of operating over time”, the Government said.
New technology advocate Frances Valintine says Budget 2023 moves to help small businesses are welcome, but too small-scale. Photo / Greg Bowker
More needed to ‘move the needle’
Tech education and new technology advocate and academyEX founder Frances Valintine told the Herald the $26.6m for small companies to digitally upskill was welcome but “small-scale” at a time when in terms of adopting new technologies, “the needle is not moving for a lot of businesses”.
Valintine was disappointed there was no equivalent to the A$101m Critical Technologies Fund announced in Australia’s Budget earlier this month - where funds were earmarked for helping businesses to get to grips with emerging technologies such as AI.
She said there was scope for the new tech hubs to address emerging technologies, and they could also be accommodated to some degree under the $451m boost for tertiary education, but it was hard to tell from the scant level of detail in Budget documents.
Valintine said the gaming rebate was welcome, if a long time coming. She was involved in initial efforts to lobby for the measure a decade ago.
Digital divide closed - a little
“I’m thrilled to see the Equitable Digital Access programme Ministry of Education funding to provide connectivity for households who can’t afford an internet connection got a $15m extension for a further year,” IT Professionals NZ chief executive Victoria MacLennan said.
“But I’m disappointed to see no longer-term funding to resolve affordable connectivity challenges, especially in this tight fiscal climate.”
The $15m will cover free internet connections for some 18,000 students from low-decile homes - at least for the next year.
The ITP head liked the $26.6m for boosting digital skills and increasing women’s participation in the technology sector from 27 per cent to 50 per cent by 2030.
“I’m thrilled to see the Digital Technologies Industry Transformation Plan funding for skills got across the line. The focus on the ability to learn while you earn and increasing the participation of women in this sector [is] welcome... I’m impressed that the Government was prepared to put a target in place on the latter – 50 per cent of the workforce by 2030 is achievable with a collaborative effort by industry, Government and the education system to create the cultural change required,”
But she said further money would be needed to meet the target.
MacLennan said it was “great” to see the Elevate venture capital fund topped up, but added: “There hasn’t been much news on the performance of this fund to date, so it would be interesting to understand the metrics moving forward.”
