Brought down on the side of ‘creative’ people – Caveat Emptor – the budget

The Government has not yet explained some Budget proposals in detail. Caveat Emptor: a principle in commerce: without a warranty the buyer takes the risk. The excitement is the budget will allow small business to get a tax advantage for spending, and being creative. The carrot is to encourage you to be a start-up. The beware warning is because; generally the announcements made, as part of the Budget will have to pass as legislation before they take effect. Therefore, Budget proposals should not be taken as fact yet, even if a starting date is proposed.

It is right to get excited, it is a policy turnaround with promise. A promise you will be rewarded for being creative. Now comes another issue: While it helps start-up, being creative just does not cut it at all when it comes to describing what you do (why you are a desirable product). You see a well thought out plan is more than a document; it is the display of your method to success.

As a small business owner you realize the measure of your worth is how you can innovate and compete. There is even a separate government program designed for that purpose. The necessary step is you must have a plan that is focused on an idea and method. If you think about this you realize a politician emphasizing ‘creative’ might be silly. Our PM has repeated wailed the word on the media as describing the primary need for being successful and rewarded by the budget.

What is wrong with the word ‘creative’ you ask? The word ‘creative’ may mean “deceptive in presenting financial information”. The dictionary tells us so, and it seems a poor choice of word to be used in the Budget meant to build confidence.

Maybe the Treasurer is doing a better job of showing an understanding of language – of the budgets intended purpose, and I quote: “If small business people are investing in innovation and job creation, we should be celebrating. That’s fantastic and that’s how you grow an economy.” Then we take notice the PM was reluctant to use the word ‘innovation’ in his address; he preferred to embellish ‘creative’.

Continuing with the Treasurer’s words: “We focused on continuing with our economic plan which is built on last year’s budget, is built on a number of decisions we have made since we came to government.

We are continuing with that economic plan”.

The above comments while confusing are at least reflective of a change to the mindset, or at least, a thought – Start-ups will save us?

Where did that idea come from? A recent start-up economy study undertaken by PwC and commissioned by Google Australia forecasts high-growth technology companies could contribute four per cent of gross domestic product (or $109 billion) and add 540,000 jobs by 2033 from a base of about 0.2 per cent of GDP today.

However, they also warn of market failure and the reason why it is likely.

Then comes the worrying bit of all this enthusiasm. According to a World Economic Forum report, “Australia’s start-up ecosystem is already lagging behind those of many other developed nations due to a lack of emphasis on entrepreneurship education, limited engagement with universities and poor cultural support for entrepreneurs.”

Back to more worry: Treasury makes no forecasts beyond 2016-17. After that, it only makes a technical assumption that all will be well over the following five years. In other words the assumption we will able to achieve nirvana. To this point we read one media report even said :It’s what Happy Joe’s Fairy Godmother might deliver for him, if he had one. It’s not what you would want to base our economic policy settings on.”

To recap earlier in the blog. The risk of being creative is the creator may be seen as deceptive in presenting financial information. The risk of presenting innovation is that might be seen as coincident and opposed to the purpose for the statement.  The case for the cost benefit for the policy would have to ask and answer: Is this idea creative or innovative. It cannot be both otherwise you might be opening for a consensus. Consensus has a habit of finding a rule against the ideals. If you have had policy training, you might be saying – bloody ‘creative’ budget got me going. If we play semantics with the wording, and the PM can spin this morning as encouraging ‘creative’ small – to mean what he did not intend? Did he intend to omit to say innovative small business to be encourage, the day after the budget?

We tested that thought, and to paraphrase some of the responses:

  • We need local employment opportunity to go along with the incentive, something we often see social planners forget about.
  • We to be producers too, not just service providers.
  • We see a different economic reason altogether, the incentive increases our reliance on imports. We have had our manufacturing sector stripped of its ability to compete.
  • Startups are not just IT companies. Real innovators make things, not just create.
  • They don’t get the supply demand balance!
  • Does anyone have a spare $200million laying around, we have a outstanding start-up ready to go. But we have no government support! That got our attention. It is real and the problem policy does not want to know.

Think again if you think they got. Than listen to this game of semantics, on ABC TV: Interviewer Leigh Sales (LS) and Interviewee Joe Hockey (JH) –

LS – The Government’s spending as a percentage of GDP is 25.9 per cent. That is the same as the previous Labor Government (was) spending at the height of the global financial crisis.

JH – Not true. They got to 26 per cent.

LS – You’re at 25.9 per cent?

Another commentator of the semantics, said:

Maybe Australians are thought they don’t know when their legs are being pulled!

Now the dust has started to settle on the hype of the budget. There is a realisation that the accelerated depreciation schedule that was announced for those nice to have tools of trade (sometimes called big boys toys) is not gifts. The scheme is designed to offset your tax liability when you earn enough money to pay for them. The issue them is one of equity. A positive of this is that the plumber or electrician is now fully aware that a market is supply and demand. Albeit the new measure makes them aware they do need to make enough money to pay for the toys. The story continues as we received a plumbing quote a week before the accelerated depreciation for small business was announced – it was $1,700. A few days after the announcement – it was changed to $2,400. Why, the reply to pay for items I need to buy? Why, do you need to buy them? Because I realised I had to earn more money to have a liability to pay tax and that tax is what I can claim from what I buy? And, we were to be a willing to pay for that purpose? Yes. We did not find that equitable – so we put off our purchase.

So the problem is ‘start-up’ are not stand-ups or creative types on how to make money. A genuine start-up is backed by a method that will create money and not just redirect money from old to new etc. We think – nay – still confused!

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