With a tech sector worth A$167 billion, Australia’s start-up scene is resilient and full of potential, despite challenges arising from global uncertainty and economic fluctuations.
In recent years, Australia has fostered a robust environment for tech development, becoming the third-largest tech ecosystem in the Asia-Pacific region, with healthtech and fintech sectors dominating funding. The tech sector now stands as Australia's third-largest industry, growing by over 80 per cent in just five years.
Here, we explore the factors driving growth, opportunities, and risks in Australia's tech ecosystem in 2023.
Australian government support
The Australian government has implemented various policies and financial incentives to stimulate the tech industry's growth. These initiatives have created the perfect conditions for capital raising, product development, and market launches, with Australian startups raising a record A$7.4 billion in 2022.
One significant example is the Consumer Data Right (CDR) which was introduced in November 2017. It aims to provide consumers with more control while sharing their banking data with third parties and now, CDR is driving growth and innovation across the financial sector by offering new opportunities, including the development of new products, business models and jobs.
Moreover, the government has invested in digital infrastructure, R&D, and skill development to foster a thriving ecosystem for tech entrepreneurs and established businesses. Some examples include the A$1bn Critical Technologies Fund and the A$9.9 Cyber Security Fund, as well as a variety of R&D tax incentives for tech companies.
Access to talent, revenue, and capital
Australia's talent pool has been a critical factor in the success of its tech ecosystem. However, the nation currently faces a talent shortage, which has been accelerated by the pandemic, that could impact the growth of fintech and other tech sectors. Attracting and retaining top talent remains a priority for businesses to succeed in an increasingly competitive market. At Newfound, we’re interested to see if sector-wide scale-backs will help negate the talent shortage, however, this is likely to be short-lived.
Despite the challenges, Australia's tech ecosystem still offers a wealth of opportunities for startups and investors. In fact, Australia ranks 1st in the OECD for its capacity to attract and retain highly educated workers, and in terms of tech specifically, the Tech Council of Australia (TCA) is working towards having 1.2 million people employed in tech jobs by 2030. As stated previously, the Australian government is greatly supportive of its tech sector, recognising that technology plays a huge role in today’s society, impacting almost every other aspect of day-to-day life and business.
Lastly, we must consider how the country's advantageous location within the Asia-Pacific region grants access to emerging markets and new revenue streams, while strong government support creates a favourable environment for capital raising.
If we continue to consider the country’s geographical location, Australia's proximity to Southeast Asia presents a significant opportunity for expansion, especially for fintech companies. Markets such as Singapore and Southeast Asia offer high-tech adoption rates, an underserved banking sector, and a growing demand for agile digital financial services.
Similarly, Australia has outstanding trade links, with free trade agreements in China, Korea, India, Thailand, Malaysia, Japan, the US, UK, Hong Kong SAR, Singapore, Indonesia, Peru, Chile and New Zealand.
The UK-Australia free trade agreement included the world’s first-ever innovation chapter, facilitating the free flow of data, and saving UK businesses from the cost of setting up servers in Australia, whilst maintaining personal data protection standards. This has only been strengthened by the UK joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in March 2023.
By focusing on expansion in these neighbouring markets, Australian businesses can tap into a wealth of opportunities and strengthen their regional presence.
Australian tech challenges in 2023
Despite the opportunities, Australian tech businesses are still facing several challenges in 2023. These include:
Moreover, the potential global recession in 2023 could impact Australia's tech ecosystem, affecting capital raising, rising costs, and talent retention.
In conclusion, Australia's tech ecosystem in 2023 offers both opportunities and challenges for startups and investors. The country's strategic location, government support, and access to emerging markets are key drivers of growth. However, businesses must navigate a more cautious investment climate, talent shortages, and increased competition to succeed in the ever-evolving tech landscape.
The Australian fintech marketplace continues to flourish while facing upcoming challenges. As proud members and supporters of FinTech OZ, Newfound is your partner in growth and will support you on your journey to success.