Australia's Nobel Laureates III State of Our Innovation Nation: 2021 and Beyond

INNOVATION DEMANDS NATIONAL ACTION

The Shadow Minister for Innovation, Technology and the Future of Work calls for a rethink on public spending, in which government is the first buyer for Australian innovations.

By the HonClare O’NeilMP

Innovation is like exercise. It hurts when you start, but the more you do, the easier it gets. And, it’s absolutely essential for our country’s economic health. Right now, the Australian economy is barely exercising its innovation muscles. We’re relying too much on what we dig out of the ground and grow; we’ve become too reliant on a narrow range of exports to a narrow range of countries; and we’re not gaining enough national wealth from inventions or innovations. And these failings are hurting us far more than the aches and pains of reform.

These economic problems are reflected on the flip side of the coin: the labour market. Wages have been stagnant for a decade. Casualisation and underemployment are rife. We’ve become too reliant on population growth for economic growth and we’ve become addicted to property speculation. As a nation, we’re paying a lucky few Australians enormous amounts to produce things of questionable value, and some of the people who do the most important work in the country barely earn enough to live on. If we want to leave our children a prosperous, sustainable, egalitarian country, we need to change how we’re doing things. Take the Research and Development Tax Incentive (RDTI). The RDTI is the principal policy the Australian Government uses to support new ideas and innovations in the economy. According to Treasury, around 13,000 companies are registered for the RDTI. The trouble is that we don’t know much about what those 13,000 companies are researching and developing. We don’t know whether it is in line with the strategic priorities of the national economy. We don’t know the cost-benefit analysis of the tax offsets. We don’t know whether the RDTI is value for money or a waste of money. We just don’t know.

Australia cannot afford to continue with such a passive approach to innovation.

Globally, best-practice economies are proactive. They acknowledge that countries like Australia – with just 0.25% of the world’s population – are not going to be the best at everything. Best-practice economies are driving innovation by focusing policy and spending on a handful of national research and innovation priorities in areas of comparative advantage. Some are setting priorities through developing national missions – an approach advocated by economist Mariana Mazucatto. Under the Mazucatto approach, countries are prioritising their most important challenges – then focusing on policies, programs and investments that are in line with those priorities.

The lack of willingness to put innovation at the centre of public policy is hamstringing our economic future

Australia is doing the opposite – letting a thousand flowers bloom. And our level of investment is going in the wrong direction. In the 2019 financial year, Canberra spent just $5.5 million of the Research Infrastructure Investment Plan – and innovation budgets have been slashed. The Federal Government’s spending on tertiary education in Australia is now 0.7 per cent of GDP – well below the OECD average of 1.1 per cent. Not only that, Australia ranks ninth out of 11 comparable nations on research and development spending – with our R&D investments lapped between two and four times by the US, Germany, Japan, Korea, Israel and Sweden.

These approaches, and the lack of willingness to put innovation at the centre of public policy, is hamstringing our economic future.

It doesn’t have to be this way. Australia has all the things we need to have a high-performance economy in the 21st century: a highly educated population, a system of government that actually works, abundant natural resources, the world’s best scientists, brilliant universities, some of the world’s most liveable cities and one of the world’s largest per capita reserves of retirements savings. Most countries would give anything to be in this position.

The missing piece is government engagement, resourcing and strategy. To win in this new era, we need to get this right.

The Federal Government’s view is that it’s enough for Australia to be an adopter or user of technological innovation. A consumer, in other words.

I disagree. In my book, you’re not innovative if you buy someone else’s latest product or idea. You’re just another consumer. Australia needs, systemically and actively, to come up with new ways of thinking and doing things.

In this, government can play a critical role. In fact, it must do so.

We first need to nail the basics. Australia is not spending nearly enough on R&D. We need proper funding for universities and the CSIRO, and policies to support a more collaborative approach to innovation, along with a stronger focus on commercialisation. All this has been understood in policy circles for a decade.

If government gets more active, so much more can be done. Government spending in Australia is more than a third of our GDP. We need to focus that spending to ensure it delivers the maximum social and economic benefit to the Australian people. That means instead of just dogmatically debating tax changes as though they are the only lever at our disposal, taking off the blinkers and following the evidence to find new ways to get government – the most significant single actor in the economy – to play a more constructive role. This much is clear: our anaemic economy needs a transfusion of red-blooded industry and innovation policies. Properly structured, government can be an innovator, using its critical mass to inspire, create and facilitate productive change. In other words, the Australian Government needs to think and act like a smart investor.

As a smart investor, we need to focus on areas of competitive advantage – and national need. For instance, climate policy is both an existential threat to our way of life and a massive economic opportunity. With more natural renewable energy resources than any country in the world and the best scientists in the world, we have ample opportunity and expertise. As economist Ross Garnaut has written, renewable energy could be a catalyst for the development of new, globally competitive industries, including heavy manufacturing. Australia could also become a global leader in a vast array of subjects on which many other countries will be looking for expertise in the coming decades, such as coastal erosion, optimising energy use, smart infrastructure, new agricultural techniques, water conservation, climate-conscious cities and sunscreens with enhanced skin-cancer protections. The opportunities are endless. But we need direction – and national purpose.

Setting national missions could give Australia that national purpose, rallying our universities, governments, unions, scientists, super funds and businesses around specific policy goals. Imagine the vigour that could be unleashed by engaging millions of Australians in articulating common goals for our country and economy, then backing those moonshots with the critical mass of government.

We also need high-quality institutions to create, coordinate, frame and deliver on national missions over the long term – and to ensure those missions are built on evidence rather than dogma. The importance of making good, long-term decisions can’t be overstated.

Australians are a dynamic people. But the dynamism of our people is not reflected in our economy today.

That needs to change – fast. Our governments need to become as sensible, pragmatic, practical, innovative and dynamic as the people they represent.

The Hon Clare O’Neil MP is the Shadow Minister for Innovation, Technology and the Future of Work, and the Member for Hotham, in Melbourne’s south east.