Recent Changes Spell Trouble for Australia’s Tech Sector

Category: News

Over the past year, the technology industry in Australia has seen growth that has outpaced the expectations of citizens and analysts alike, fed by startups tapping into the nation’s underutilized labour force and reskilling them via the wide availability of online courses in the marketplace. The burgeoning sector is reshaping an economy long dominated by old-line industries like mining and manufacturing. For a while, it seemed that the sky was the limit, but now a slew of legal and regulatory changes imposed by Parliament threatens to undercut much of the progress made in recent years. Here’s what’s happening to Australia’s tech sector, and what the results may be.

New Encryption Regulations

In December, Australia’s Parliament passed a bill that would compel technology companies to create a backdoor into their encrypted communication services. In the run-up to the bill’s passage, nearly every major global technology firm came out in opposition to the new law, arguing that it was unnecessarily vague and broad. The fear was that it would create fatal flaws in encryption that malicious actors would then exploit. Recently, tech industry group StartupAUS asked the government to reconsider the law, in a submission to Parliament backed by big-name players Atlassian, Canva, Blackbird Ventures, and others. They insist that the law is loaded with the potential for harm to the local industry, and could create unintended consequences beyond what lawmakers intended.

Tax Incentive Crackdowns

The encryption bill isn’t the only recent government-dealt blow to the tech sector. Around the same time, the government began a crackdown on technology businesses that take advantage of a tax scheme meant to fuel research and development. Some of Australia’s biggest tech firms have been issued demands for repayment of previously claimed tax breaks, amounting to millions of dollars in clawbacks and fines. Already, the move has caused business groups to warn that it could prompt a mass exodus of tech R&D operations from the country, harming future growth.

The End of the Innovation Ministry

In another sign of waning support for tech, the government also eliminated the minister of innovation from the cabinet. That robs the tech industry of high-level advocacy in the government, which some fear will allow for even more harmful changes to occur. So far, industry leaders have decried the move, and analysts see it as yet another blow to the nation’s short-lived and poorly-received innovation agenda of 2015.

What’s Next

Judging by the steady drumbeat of bad news for Australia’s tech sector, it seems as though much of the optimism generated over the past few years has dissipated. It’s still too soon to tell how badly the government’s recent moves will affect the sector as a whole, but the outlook isn’t exactly great. That isn’t good news at a time that the broader Australian economy seems to be slowing, and will need growth engines like the technology industry to keep it afloat. Unfortunately, for Aussies who depend on the new innovation economy, only time will tell.

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