Lack of leadership on innovation threatens Australia’s economic future

Manufacturing and media networking specialist, Peter Roberts, reports on the threat to Australia’s economic future by the Coalition’s failure to support innovation. In 2015, former Prime Minister Malcolm Turnbull welcomed us to the “ideas boom”, launching a National Innovation and Science Agenda to drive smart ideas that would create business growth, local jobs and global success. The boom was soon revealed as a “bust” and the government’s failure to deliver has seen Australia seriously sink down its rankings on the Global Innovation Index.

REMEMBER MALCOLM Turnbull’s innovation revolution?

It was flavour of the month but interest evaporated when the word failed to resonate with voters and the then Prime Minister turned to more pressing issues.

The rise and fall of innovation under this government is just another chapter in the marginalisation of what arguably is the key determinant of Australia’s economic future.

Innovation was recognised as the driver of rich, sophisticated economies back in the 1980s when a 150 per cent tax deduction sent a clear message to business that this was important.

Companies then were spending on average less than those in Iceland on R&D. Yet they responded, and business expenditure on R&D (BERD) doubled in the 1990s then doubled again to reach around 1.4 per cent of Gross Domestic Product (GDP) in 2007.

This rise matched a period of great economic progress in Australia, and yet R&D spending was still short of global leaders where business spends 2-3 per cent of GDP on research and innovation. (R&D is only an approximate measure for what constitutes innovation, but alas it is the best measure we have got.)

Depressingly, the R&D tax concession has been ruthlessly pursued by the bean counters in Treasury, who can’t see why a company spending a dollar on R&D should get more encouragement from Canberra than those buying a utility vehicle or a coffee pot for the staff canteen.

The deduction has been successively re-designed, restricted, cut, re-designed and cut again until it no longer applies to large companies at all. And small companies must jump through bureaucratic hoops to justify every dollar spent.

Today a few leading companies such as CSL, Cochlear and ResMed spend big on R&D. Most simply underspend, essentially using up intellectual capital generated in the past, and banking little away for the future.

The problem has been exacerbated at the political level, where we have had five innovation ministers and a similar number of industry ministers in as many years. How can such short-term ministers possibly get on top of complex issues like this?

But the big issue now is Australia is seriously sinking down the world rankings for innovation spending. We have been spending less since about 2007.

We need to take action before we again are ranked with the Icelands of the world.

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The above article was published originally in @AUManufacturing.

Peter Roberts is a manufacturing and media networking specialist. He was a senior columnist, writer, editor and editorial manager, founded a start-up online procurement service and served on the board of Australia’s premier private-sector funder of research into innovation and competitiveness.

You can follow Peter on Twitter @PeterTRoberts or the Australian Manufacturing Forum @AuManufacturing.

Australian PM Turnbull's AU$1.1bn 'Ideas boom' revealed as a bust https://t.co/HT8hwz1vl4 via @theregister

— Mike Kelly (@MikeKellyofEM) September 30, 2017