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  • Published on: 7th September 2019
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Does the Turnbull governments pay anything more than lip-service to supporting innovation?

President Obama more articulately summarised the government role in innovation when he said “our free enterprise system is what drives innovation. But because it is not always profitable for companies to invest in basic research, throughout our history, our government has provided cutting-edge scientists and inventors with the support that they need”

Australia has a long history of innovation and appropriate government support, with no greater example of this than the CSIRO. However, linked with Australia’s love for an underdog, I believe a large swathe of Australia’s ingenuity and innovation is driven by life in a relatively harsh environment, to ensure our survival and advancement. In short Australians love a challenge. This makes me ponder if the resources boom, while hugely beneficial economically for Australia, has undermined the capability of the Australian Government to support innovation. When I consider the following statement - ‘the structure of the Australian economy has shifted over time away from agriculture and manufacturing towards services. Structural change has tended to occur in waves, driven by a range of factors including rising demand for services, the industrialisation of east Asia, economic reform and technical change. In recent years, the mining sector has also grown in importance, contributing to the expansion of the resource-rich states of Queensland and Western Australia relative to the south-eastern states. The mining boom has also led to an increase in the rate of structural change, particularly when measured in terms of nominal output and investment.’  The key point for me from such statements is that the government had to do very little to support the transition to an economy strongly underpinned by the resources sector. Rather they were caught up in the rush and rode the wave to prosperity. While an Ernst and Young article into the role of innovation in mining that notes that it is ‘clear to most observers that the mining industry lags other industries in transformational innovation ...’  this does not necessarily ring true for me in reference to the Australian mining sector – where due to demand a ‘dynamic and innovation-based mining equipment, technology and services (METS) sector’ emerged . The government had little role to play in the emergence of innovation in this sector, nor in subsequent innovations as businesses look to adjust to the downturn . However, this is probably a somewhat unique situation where the resources to fund innovation existed within the private sector. As Australia reaches the point of our next critical economic transition we cannot rely on the Australian private sector, primarily because the benefits and challenges of the information revolution are not contained within a single sector.

The government has shown glimmers of support for innovation, such as through the establishment of the International Mining for Development Centre (IM4DC). This initiative brought together universities, government, industry and community organisations as a platform for change and innovation and to promote Australian excellence internationally. Granted 2011 was probably a tad late in the game, and a short lifespan, until 2015, limited the potential impacts of the concept. But the final report of the IM4DC provides some useful insights on innovation for the government. ‘Recognising the long term nature of transformational outcomes, IM4DC provided knowledge, networks and analysis to empower the capacity of individuals, coalitions and organisations to influence the realisation of the higher changes. In a relatively short timeframe, the IM4DC program has laid a strong foundation for the realisation of inclusive economic growth and social development ...’ .

Unfortunately, while innovation is without question the current buzz word in Australian politics, true examples of the government fostering innovation are few and far between. As such I question whether there is a true commitment, or even an established position as to how the government can support the emergence of Australia as a leader in the information revolution. Much of the support for innovation touted by the government is, somewhat ironically, nothing new. Turnbull espoused a more positive mantra – avoiding the terminology of a budget emergency, but there seems to be little substance to this mantra. A number of key ‘innovation announcements’ have occurred, but these do not necessarily equate to a greater support for innovation.

As an example, the ‘additional’ $100 million in funding for the CSIRO announced under the $1.1 billion National Innovation and Science Agenda merely returns most of the $110 million that was cut from the CSIRO in the 2014 budget. A media article Australian Government investment in science reaches 30-year low  includes Fairfax media analysis showing that Science and Innovation spending has fallen to the lowest level in 30 years, falling to 2.2 per cent of total government expenditure; and to the lowest share of GDP in 25 years. The article claims that Australia ranks poorly amongst OECD nations in terms of Research and Development expenditure as a share of GDP. This is true as demonstrated by the below table from the OECD showing direct government funding of Business Expenditure on Research and Development as a percentage of GDP, where Australia ranked 30th in 2013.

However, if you look in terms of indirect support through research and development tax incentive, Australia looks much better, with a ranking of 7.

The problem with the current political situation is that it doesn’t align with addressing the current problem for innovation in Australia. Turnbull said himself at the launch of the National Innovation and Science Agenda, that ‘… universities and research organisations like the CSIRO are also among the best in the world’ but particularly maintaining the CSIRO as a world class organisation requires sustained support from the government, not least of all financial support. Turnbull highlighted that Australia’s ‘appetite for risk is lower than in comparable countries, which means that Australian startups and early stage businesses often fail to attract capital’ and that ‘Australia is falling behind on measures of commercialisation and collaboration, consistently ranking last or second last among OECD countries for business-research collaboration.’ This situation does not bode well for the future of innovation if the Government does not step up to the plate to assume a greater level of risk in support of improving innovation.

Another announcement, the $140m DFAT innovationXchange, was entirely funded from within a shrinking aid program. This is in itself not an issue, as innovation does not necessarily require new money. But what seems to be lacking is any substantive innovation. The announcements at the launch hardly heralded in a new era of innovation for government – providing $20 million to a partner to build health systems, and a $30 million funding contribution to a global fund .

As Steve Jobs once said ‘innovation distinguishes between a leader and a follower’. If the Australian Government wants to see Australia as a world leader in innovation and to position the country to maximise the potential benefits of the information revolution, there needs to be more considered action and an actual willingness to engage with risk. The problem, with the above example is that DFAT (and the government) appear to be trying to fit the mould of an innovative organisation rather than actually innovating. By this approach the opportunity provided by and the actual point of innovation are both being missed. I will provide a little bit of latitude for Turnbull as he is still relatively fresh in the role and arguably has to repair the damage to science and innovation done by his predecessor. But the longer the government waits before setting the course of the nation through the information revolution, the greater the potential damage to our international reputation.

Despite what the government appears to think, announcements of money for innovation programs or investment in infrastructure are not the only the only options for communicating to their constituencies that they are serious about innovation. But to draw on a comparison to Europe, the government is not doing enough to manage the conversation of innovation and the transformation of Australia’s economy. Understandably much attention is given to the issues with the NBN, particularly with Australia slipping to 60th in the global rankings . But as is shown in Europe good infrastructure alone is insufficient for innovation. Yes, quality digital infrastructure will be important but it is not a prerequisite. For example, while eastern European cities often have excellent digital infrastructure and high numbers of science, maths and engineering graduates, they are unable to attract digital entrepreneurs.  The issues identified for Eastern Europe – the lack of available funding and absence of an entrepreneurial culture  – are refreshing for Australia in that we really only need to address the funding issue.

As Australia finds itself approaching a critical economic transition point where it can no longer rely on resources for growth, the question is whether the government is up to the task. Unlike the resources boom, Australia is not going to be able to simple ride the information revolution wave to prosperity, it will take action. We as a nation have demonstrated our ability to adapt in the past. The creation of the CSIRO is a prime example, taking foresight and commitment for a long term benefit. While the Government continues to espouse a dedication to supporting innovation, for the moment this narrative lacks substance and direction, from a government that remains too focused on cuts to improve the current fiscal situation at the detriment of Australia’s future.

The government at least has to at least take seriously its role as an exemplar of innovation or to develop a strategy to establish an innovation friendly environment. The tax incentives  spoken of above are potentially an effective way to address commercialisation and collaboration issues that Turnbull highlighted, but it is only one piece of the puzzle. The government remains an employer of mass, operating with outdated structure of strong physical locations, fixed structures and reporting lines. Efficiencies continue to be sought by applying arbitrary savings exercises rather than dedicating resources to dissecting whether the way the government operates is still the best option or harnessing the options provided by the digital revolution.

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