16 December, 2019

Statement on MYEFO from the Australian Investment Council

 SYDNEY: The Mid-Year Economic and Fiscal Outlook (MYEFO) released by the Treasurer and Minister for Finance on 16 December shows Australia is continuing to face economic headwinds from weaker growth in the global economy, the impact of geopolitical tensions on trade flows, reduced productivity and lower agricultural production and exports.

“The continued downward pressure on our economy from these factors highlights the need to address short-term demand that will boost employment and consumer confidence in addition to long-term and visionary policy reforms,” said Yasser-El-Ansary, Chief Executive of the Australian Investment Council.

“While MYEFO has stated that mining investment is expected to grow in 2019-20, for the first time in seven years, Australia’s real economic and jobs growth can come from investment into innovation and jobs of the future.

“Australia can no longer afford to rest on its past successes and rely on the top five per cent of companies to provide innovation growth for our future. We need to move quickly to transition and adapt our business models to the highly technological and globalised marketplace we are a part of, in order to continue to grow our knowledge-based economy and create jobs for future generations,” Mr El-Ansary said.

Boost investment into innovation

“In addition to the immediate measures announced in MYEFO to help drought affected farmers and their communities, there is tremendous scope for government to further boost its commitment to regional growth through supporting private capital investment into innovation focused industries that will create jobs of the future and boost our nation’s productivity,” he said.

As an example, the need for investment in new technologies to make farming more viable and sustainable, can be seen in the growing number of AgTech start-ups that are progressing through incubator and accelerator programs with help from seed and early stage capital.

Mr El-Ansary also said: “In the next few years, these new businesses will need further funding support, particularly from venture capital investment, to get to their next stages of growth. And, their innovative products and services have the potential to revolutionise Australia’s AgTech sector which is predicted to be Australia’s next $100 billion industry by 2030.”

Deregulation for Australian Business

The MYEFO initiative to streamline processes and reduce red-tape to enable small businesses to more easily access the export market will be a positive step towards generating a more efficient export market and to improving productivity amongst Australia’s fast-growing companies.

Business Growth Fund

The Federal Government’s $540 million Business Growth Fund announced in November will add further momentum to the record-breaking growth seen over recent years within Australia’s $30 billion private capital investment sector.

“There’s no question that small to medium-sized enterprises (SMEs) and fast-growing early stage new business ventures are not only major employers today, but they will increasingly become more central to productivity gains and economic growth across Australia over the long-term.

“In 2018 alone, Australian private capital funds secured an impressive $6.6 billion in new funding commitments, which brings the amount of committed capital available to be invested into high growth potential Australian businesses to around $11 billion today.

“The professional business growth and strategic skills that come with private capital investment often lead to expansions in the workforce of businesses that attract investment, driven by growth in sales within domestic and international markets, and greater levels of investment into innovative market-leading research and development,” Mr El-Ansary added.

Research by Deloitte Access Economics shows that firms under private equity ownership in Australia added $43 billion to the economy in 2016 – equal to 2.6 per cent of GDP.

Mr El-Ansary also said these is tremendous scope to increase this amount: “Across private capital funds, $11 billion in equity capital is ready to deployed right now − a number that could easily be doubled or tripled with the added availability of debt capital to fund the growth and expansion of businesses at the same time.”

Infrastructure investment to increase productivity

Data released by the Australian Bureau of Statistics this month shows in 2018-19 Australia experienced its first decline in productivity since 2010-11. This was attributed to changes in the composition of our workforce due to educational attainment and work experience.

The government’s commitment to invest in critical infrastructure projects across Australia will contribute to increased productivity.

The private capital sector is committed to investment into infrastructure and long-term, patient-capital projects that will contribute to the sustainability of our economy well into the future.

“The Australian Investment Council supports initiatives that lead to expansion in the workforce of businesses that attract investment, growth in sales within domestic and international markets, increased consumer demand and greater levels of investment into innovative market-leading research and development,” Mr El-Ansary said.