Investing in innovation

Government after government exhorts ordinary Australians to save for the future by squirrelling away any spare cash into superannuation or other savings. Yet these same governments have gradually let slide their focus on the future of the nation as a whole - at least as far as research and development, science, engineering and technology are concerned.

Governments have simply stopped investing in the national future in any meaningful way.

In July the Australian Bureau of Statistics released R&D statistics for 1999 which showed industry had invested $3.9 billion on R&D. That is 5 per cent less than in 1998 and 9 per cent less than 1997.

Admittedly, that is industry's R&D budget rather than the national R&D budget in total, but it remains a budget significantly affected by government policy.

In 1996 the Government wound back the 150 per cent R&D tax incentive to 125 per cent, and for many companies the cost of complying with the scheme was greater than the rewards from the tax break.

Australian R&D projects got shorter, smaller and employed fewer people. In the early 1990s around 100 major companies were members of the Australian Industrial Research Group; today, some 45 remain in the group.

Compared to other OECD countries, Australia's spending on R&D is woeful. Coming at the dawn of the knowledge millennium, it bodes ill.

In August, Australia's chief scientist Dr Robin Batterham released a paper called "A Chance to Change", which confirmed industry's poor R&D record, explored the country's apparent antipathy toward science, engineering and technology, and suggested a series of remedies which might at least get the nation back on track.

He suggests Australia needs to boost education in science engineering and technology, create an environment in which new ideas might flourish, and develop a climate which would let those ideas transform into a commercial reality.

Of course, that costs money, and Dr Batterham has been specific about the hundreds of SET scholarships, and post-doctoral fellowships that are required to boost the culture; the need for grants and investment in the national research infrastructure; the need to enhance R&D tax breaks, and to establish pre-seed capital funds to help get ideas off the drawing board and into production.

Realising his vision won't come cheaply.

Just days after Batterham's report was released, the Miles committee report ("Innovation - Unlocking the Future") on innovation was published, reinforcing Batterham with the warning that the Government needed to spend $2.6 billion over five years if Australia wasn't to become a "branch office economy".

It's tough talk, and it did not come from a scientist (although Dr Batterham was one of the participants in the Miles committee), but from a senior partner in the law firm Corrs Chambers Westgarth, David Miles.

The central plank of the report's recommendations is that the 125 per cent tax break on existing R&D be lifted to 130 per cent, and that for companies which further boost their R&D spending, additional tax concessions of 170-200 per cent should be introduced for the new R&D spending.

It is big money, but these are big issues.

The Government says it will base its development of an Innovation Action Plan on the Miles and Batterham reports, a move welcomed by the Business Council of Australia whose executive director, David Buckingham, said, "The Business Council especially welcomes the moves to accelerate commercial innovation by rethinking the R&D tax concession, to increase the effectiveness of university research, and to assist entrepreneurs to bring new ideas to market. The report's broader suggestions to raise community awareness of the importance of an innovation culture are also welcome. Our children need to be made more aware, and young researchers need to consider the commercialisation of their work. The proposals in this report should help move Australia in that direction."

And why is this all such a big deal for Australia?

"Innovation is the driver of every modern economy - it is the key to competitiveness, employment growth and social well being," notes Dr Batterham's paper.

Of course, if we don't want that we can happily stop investing right now. And if you don't want to eat when your retire, don't bother about that superannuation business, either.

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