Innovation grants slashed to save $707m: Budget 08

Commercial Ready, a SME grants program that subsidised innovation and commercialisation, was scrapped in this week's federal Budget — a move that will save AU$707 million over four years.

Companies used to be able to claim 50 percent of innovation project costs under the program, with a grant ceiling of AU$5 million.

According to Tammy Halter director of grant recipient Absolute Data Group, it was one of the only programs where grants could be obtained for spending on lodging patents or marketing activity.

The decision to cut the program was met in reference to a report completed by the Productivity Commission, which found that Commercial Ready supported too many programs that would have gone ahead without public support.

"The increasing focus of some business programs [such as Commercial Ready] on later-stage commercialisation, rather than research, runs the risk of supporting R&D that might have occurred anyway and of shifting support away from the stage of R&D where spill-overs are most likely," the report said.

Absolute Data Group's Halter strongly disagreed.

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Roger Martindale, business development manager at software developer The Distillery, which has an ongoing Commercial Ready grant, also voiced his disagreement.

"Had we not had the grant, we would have still done the work but it would have taken several years longer," he said, adding that the company may not have proceeded at all with the work, because a bigger company would likely have stepped in before them.

The Productivity Commission disagreed: "While the Commission acknowledges the importance of 'first mover' advantage in determining commercial viability, it remains sceptical that this should form a basis for the provision of public support."

A spokesperson from the office of Kim Carr, Minister of Innovation, Industry, Science and Research, said there was "significant scope" for companies who would have applied for a grant under Commercial Ready to receive one under new programs such as Clean Business Australia.

For example, she said, a company developing a vaccine for a tropical disease, which would help if the temperature rises due to climate change, would be able to get funds.

"It's not just about developing green products, it's about acting green," the spokesperson said. "We're interpreting climate change pretty broadly."

However, Halter said green projects are so popular they don't need the extra push: "Ironically, because green is so hot, you can actually get VC money to assist you."

When asked about those companies whose projects wouldn't fit into such programs, the spokesperson admitted "we're aware there is a gap". However, the saving measures put in the budget were largely preparing for the innovation review to be finished in July, the spokesperson said.

Any new grants programs will not be introduced until the next year's budget, which will mean that small business looking for help with their innovation projects will have to wait.

The Distillery's Martindale had faith in the review. "We as a company have a lot of confidence in terms of what Kim Carr wants to do," he said.