Ardern gets her wish to make it easier for Kiwis in Aussie – the brain drain gets a boost

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New Zealand video game studios are expected to be eligible for a 40% tax incentive if they move their businesses to Australia, and several have already begun the process.

This will halt the growth of what has been one of the New Zealand economy’s fastest growing and most promising sectors, which previously reported growing 34% each year.

In last year’s budget the Australian Government announced a Digital Games Tax Offset of 30% with an eligibility date from 1 July 2022. This is on top of a 10-15% rebate from several Australian states. Locally, interactive media receives no significant Government funding.

Lower Hutt studio A44 Games has already expanded to Melbourne, while Wellington’s PikPok has expanded offshore with a new studio in Medellin, Columbia. New Zealand’s other leading studios including RocketWerkz, Runaway Play and StaplesVR are also making plans to move their thriving businesses across the Tasman.

“This is a crisis moment for our high-tech economic development aspirations,” says New Zealand Game Developers Association chairperson Chelsea Rapp.

“The interactive media sector has been one of the New Zealand economy’s rising stars. It is high-tech, fast-growing, clean, green and pays high-wage salaries. These are exactly the type of jobs we need to grow and diversify New Zealand’s economy, but Australia could benefit from them instead if we don’t act now.

“These are New Zealand-created and owned jobs that we’re allowing to move offshore, when we’d prefer to keep them here. This investment by Australia demonstrates the value this industry has – they’re going big on interactive media because they understand its growth potential.”

Globally the interactive media and video games industry is worth over $250 billion, more than film and music combined. It is already a major portion of New Zealand’s software exports.

Industry surveys make it clear that with borders opening, jobs will flow one-way to Australia. In 2021, New Zealand employed 969 professional game developers while there were only 1327 in all of Australia.

The Game Developers Association is calling on the Government to fast-track proposals in its own Digital Technology Industry Transformation Plan, which include responding to the Australian incentives and establishing an industry development programme. “We believe New Zealand can survive with a lower 30% rebate, if it is complemented with an industry development scheme for training and startups. That will give us a strong foundation to compete long term.”

Interactive media is currently excluded from existing Government screen and R&D programmes, but the Association believes that creating an incentive scheme for the game industry will not only pay for itself, but will also result in positive gains for the Government. On average, each job in the New Zealand games industry generates over $285,000 of economic activity, making it one of our most productive sectors. With a rebate in place, the industry expects to create 300 new high-tech jobs by 2025.

Over 20 similar schemes with 25% to 40% rates exist worldwide, and now next door in Australia.

“Our interactive industry is small in comparison to North America and Europe, but it has a proven track record of success that depends on being able to hold onto the senior-level, skilled talent that we have spent decades cultivating,” says Rapp.

“The reality is that we will lose that talent and those businesses because we simply cannot compete with the offer of a 40% discount to relocate to Australia. Any chance we had of attracting overseas studios to set up shop in New Zealand ends in 2022, and some New Zealand studios are already looking at expanding into Australia instead of locally.”

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