Budget 2024: ‘No leadership’ — How tech fared

It seemed all quiet on the Western Front for technology and telecommunications in Budget 2024.

At first blush, commentators and industry insiders were struggling to find any significant initiatives in either area.

“There has been no leadership demonstrated regarding developments in AI, security, or any other technology,” Telecommunications Users Association of NZ (Tuanz) chief executive Craig Young said on the eve of the Budget.

“We emphasised to the Government in our briefing immediately after the election that they cannot afford to delay action in these areas,”

Today, he said he was scratching, without luck, for anything to change his mind.

Technology Minister Judith Collins issued no releases about technology. Media and Telecommunications Minister Paul Goldsmith made no statements on telecommunications.

Tuanz CEO Craig Young: “There has been no leadership demonstrated regarding developments in AI, security, or any other technology."

Slow and expensive rural broadband was flagged in the Ministry of Business, Innovation and Employment’s Briefing to Incoming Minister (BIM) for then-Telecommunications Minister Melissa Lee.

But if a boost is coming, it will be later. A spokesman for her successor, Goldsmith, confirmed Budget 2024 had “no new spending or cuts from telecommunications other than a savings on Emergency Caller Location Information [a $2 million cut]. That saving won’t have any impact on service or staff”.

Despite its transformative impact, there was no mention of AI.

Across the Tasman, Budget 2024 earmarked A$40 million ($43m) for an AI safety centre on top of A$102m allocated in Australia’s Budget last year to help small-to-medium-size businesses update to utilise the revolutionary new technology.

The Startup Council and venture capital firms had called for a renewal of the $300m Elevate Fund, with a top-up to $500m. An NZGCP insider confirmed there was nothing.

Collins had sought to tamp down expectations in the tight fiscal environment. VC investment slowed in key areas in 2023, including fintech, while recent start-up failures like Sunfed and Manta5 have cited difficulties raising fresh VC funding.

There was no sign an $11m programme to boost local cloud software KiwiSaaS would be renewed, along with various other measures to boost sectors such as local health tech.

KiwiSaaS’ backers argued the high-paying, export-heavy software-as-a-service industry is one of the keys to transforming NZ’s low-productivity economy. It’s already sizeable, generating some $3 billion in exports.

But Budget 2024 was more focused on the immediate cost-of-living crisis with its modest tax cuts, which some commentators say the Reserve Bank could see as inflationary and seek to offset them by leaving interest rates higher for longer.

Start-ups saw a change to the existing R&D tax credit scheme with the elimination of in-year loans — designed as a mechanism for early-stage firms to gain access to pending tax credits before they make a profit.

The elimination of in-year loans will save $8.9m over the next four years.

The saving is in the context of a scheme with an annual operating cost of about $177m. Notes with Budget 2023 say the in-loan scheme was always temporary and had “low value for money” due to high administration costs.

As previously flagged, Collins axed the previous Government’s Science City plan for four R&D hubs in Wellington, saving $462.8m over four years.

Overall, the Government is cutting nearly $370m in operating costs and $534m in capital costs from the science, innovation and technology portfolio over the next five years.

Tuanz wanted a closing-the-digital divide programme expanded from covering 18,000 disadvantaged families without broadband to 58,000. Instead, it appeared the Equitable Digital Access programme behind the original programme was defunded (the Herald is awaiting confirmation).

If more people had access to broadband, the Government could save time and money by digitising more of its services, Young argued.

Institute of IT Professionals NZ chief executive Victoria MacLennan noted pre-election, “45 per cent of our digital technology workforce — 120,000 people — hold a work visa, the majority of these at intermediate and senior levels. This isn’t going to help us get off the grass”.

But the local training boost Tuanz and ITPNZ were looking for seemed absent.

Neither was there any removal of the tax on unrealised gains that prevent start-ups from introducing employee share ownership schemes (esops) or the foreign investment fund tax that the tech industry says double-taxes those with investments offshore who want to set up camp NZ.

There was some trimming.

Returns of “uncommitted funding for Tourism, Agritech and Digital Technologies Industry Transformation Plan programmes” would deliver $38.5m over the 2024-25 financial year and $35.5m the following year (one of the few tech initiatives in Budget 2023 was $29.9m for agritech).

On the plus side, there was a one-off $10m grant to stabilise IT systems for NCEA delivery and upgrade from “legacy technology”.

And schools got $22m in funding for IT equipment replacement and cybersecurity and the GSCB got a $500,000 contingency fund, with baseline spending remaining the same.

The new funding for schools includes licensing costs for Microsoft and Google products, and funding for Netsafe.

See full Budget 2024 coverage here.

Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.