Changes to export development grant rules will lock up to 70 per cent of applicants out of the scheme, according to the consultants that advise small businesses on the grants, as the near 50-year-old program braces for a funding drop next year.
Changes announced by Trade minister Don Farrell in March increased the expected sizes of Export Market Development Grants (EMDG) but tightened the eligibility criteria.
It followed a change by the Morrison government that had opened up the eligibility requirements and switched the non-competitive program from a reimbursement model to a grants program paid after eligible expenditure is reported.
The 2021 changes triggered a wave of additional applicants and uncertainty about exactly how much recipients would be paid.
While grant amounts were agreed up front with Austrade, firms still had to demonstrate they had done the export promotion activities to receive them.
“All of a sudden everybody was asking for the maximum amount that they’re not [then] spending. So they had a budget balancing problem,” says grant consultancy Avant Group’s managing director Kate Whitehead.
“Nobody thought practically around how these changes were going to impact the process for SMEs to apply for the grant.”
Austrade reported many smaller firms had agreed on grants but then didn’t make their expected spend on eligible export promotion activities. The grants that were actually paid out were far below the maximums, leaving the authority with significant underspending.
The Albanese government’s new rules look to address this by requiring applicants prove they have minimum annual turnover, are capable of a threshold minimum spend and by updating the calculation method for the number of years a firm can access EMDG grants.
The EMDG has also switched to a “first come first serve” basis, with each grant round to close when funds are allocated. In financial year 2024-25, $157.9 million is expected to be paid out, before falling to $110 million in later years.
According to the Export Consultant Association Incorporated (ECAI) industry group around 14,000 businesses will apply when the round opens in July, but there will only be enough funding for around 2000 grants.
The group, which says it represents advisors assisting around half of all firms applying to the EMDG, estimates the changes will adversely impact 70 to 80 per cent of current and prospective applicants.
Ms Whitehead said it has become a less equitable process.
“If you’ve got 14,000 businesses spending expensive time to prepare an application to then waste all those hours, if they never had a chance of getting it in the first place, it is expensive and it’s unfair,” she said.
A looming 30 per cent cut to the EMDG from 2025/26 that was not reversed in this week’s federal Budget is adding to the concerns.
“It is at a crisis point because it is critically underfunded,” Ms Whitehead said.
“The government needs to step up and actually fund this thing properly… when it is such a proven performer.”
Ms Whitehead said adding a performance test could also ensure the grants went to the most worthy, but doesn’t want the scheme to become a competitive one.
“Having a programme that’s equitable, is properly funded, has appropriate entry hurdles in it to ensure Australian taxpayers are getting value for money will bring it back to its heyday where it used to be.”
