Our newly re-elected government is engaging in the most creative innovation ever: doublespeak.
On one hand, new Minister for Industry, Innovation and Science, Greg Hunt, is telling us he’s focused on the second and third wave of the National Innovation and Science Agenda. On the other hand, re-elected Prime Minister, Malcolm Turnbull, is cutting nearly $1 billion to R&D incentives. Is anyone confused?
Over the last few months, and during the election period, we’ve been reminded of the importance of Australia becoming an innovative country. Innovation, affecting all parts of our economy, is meant to ensure job security of Australians as we transition to a value-adding, knowledge-based economy.
Since his appointment as Minister for Industry, Innovation and Science, Mr Hunt has hit the ground running, giving a series of keynote speeches outlining his portfolio’s top priorities.
His first speech focused on the importance of science and research within our national peak bodies; his second speech focused on industry and the need for micro economic reform; his third speech focused on previewing the second and third waves of the National Innovation and Science Agenda.
In FY17, the government is budgeted to support R&D to the tune of $10.1 billion. Mr Hunt has also reminded us innovation matters because it drives 60 per cent of our national productivity.
But all this talk of R&D and its impact on national productivity and economic development has been undermined by Mr Hunt’s boss, Mr Turnbull.
The day before Mr Hunt gave his keynote trumpeting the above figures at The Australian Financial Review Innovation Summit, Mr Turnbull announced his intention to push through an “omnibus” bill containing almost $6.5 billion in spending cuts over the four-year forward estimates period spread over a raft of portfolios.
Buried in the detail is a cut of $990 million to the R&D Tax Incentive. This will be achieved by reducing the rates of the refunding and non-refundable tax offsets available under the scheme.
Counter productive
Given the R&D Tax Incentive has been a major contributor to the number of Australian businesses being involved in innovation, a severe cut to its eligibility and size of rebate could do the very opposite of Mr Hunt’s wishes.
The government is still sitting on a review it commissioned this year of the R&D Tax Incentive, which was meant to identify ways to improve its effectiveness. Many reviews of the past have been used to justify a reduction in the size of such programs.
As I’ve said before, we need to have a sustainable and long-term approach to innovation policy.
Instead of the endless tinkering of R&D programs, our government should be expanding its remit, especially for younger firms and cash-strapped innovators.
In the last year, Australia slipped from 17th to 19th in the Global Innovation Index, which ranks the world’s countries and economies through innovation measures, environments and outputs.
Australia is being pulled down by its knowledge and technology outputs, business sophistication and creative outputs.
New ideas
As Mr Hunt puts the finishing touches on the second wave of the National Innovation and Science Agenda, it’s important he reviews the programmes of the past.
We’ve had a tonne of schemes including the Pooled Development Funds (PDF) of the 1990s, the Industry Innovation Funds (IIF) of the 1990s and 2000s, and the Building on IT Strengths (BITS) programme of the 2000s.
If we wish to lift our rankings on the Global Innovation Index we must back companies who commercialise and export our innovations.
As Mr Hunt finalises the third wave, which is meant to increase the ease with which business interacts with government, he must have a strong word to government departments and his state government counterparts.
We’ve been promised a reduction in government red tape for years but it hasn’t yet happened.
I know of fintech businesses waiting for close to a year to get regulatory approval from the Australian Securities and Investments Commission because of government cutbacks.
Some state governments still charge stamp duties on marketable securities, a tax that was meant to have been abolished with the introduction of the GST in 2000.
Better still, why doesn’t he tackle the age-old employment drag of payroll taxes?
Finally, Mr Hunt needs to have a strong word with his Prime Minister and Treasurer. How can we have a thriving innovation economy in light of a $1 billion cut to R&D?
This post was originally published on Financial Review, a leading Australian online news site that reports the latest from business, finance, investment and politics, updated in real time.