CHAIR —I declare open the Joint Committee on Foreign Affairs, Defence and Trade's inquiry into Enterprising Australia - planning, preparing and profiting from trade and investment. This inquiry arose out of a continuing interest by the trade subcommittee in expanding Australia's trade and investment. The subcommittee looks forward to receiving important and significant evidence over the course of the inquiry to assist in its deliberations.

On behalf of the trade subcommittee, I welcome Mr Sedgley from the Australia Research Council. The subcommittee prefers that all evidence be given in public, but if you should at any stage wish to give evidence in private you may ask to do so and the subcommittee will give consideration to your request.

Although the subcommittee does not require you to give evidence on oath, I should advise you that these hearings are legal proceedings of the parliament and therefore have the same standing as proceedings of the respective houses. The subcommittee has a submission from the Australian Research Council—submission No. 8. I now invite you to make a short opening statement, if you wish, before we proceed to questions.

Mr Sedgley —I do not want to take up too much time with an opening statement. Perhaps I could simply say it is a pleasure to be here. I hope I can be of some assistance to the committee in its deliberations. I note that the committee has a very wide brief. The Australian Research Council's submission goes to a relatively narrow aspect of that brief, but a very important one, which is the research and development capacity of the nation. Research and development is critical to the issues that the committee is looking at. It is the foundation and fount, if you like, of ideas that underpin a lot of the commercial activity that the country will be looking for to boost its performance in trade and to attract foreign investment. It is also critically important to generating the sorts of skills in the Australian people that are going to be needed to underpin that activity.

CHAIR —Thank you. I would like to put a question to you. Can you indicate to the committee how Australia's science engineering and technology sector compares with the rest of the world?

Mr Sedgley —There is no question that in a number of areas our research capability is recognised as being of world standing. We know that through a number of sets of data. We know that Australian researchers' publication rates are very high by world standards. We certainly punch above our weight in that area. We publish in total approximately 2[half ] per cent of the world's research literature. When you compare that to our share of population, our GDP, that is a very significant figure. It ranks us amongst the top countries in the world in terms of productivity and our impact on the world.

Mr O'KEEFE —You have mentioned in your submission—and we all know— that Australia has a long-term problem of taking quality research through to commercialisation. The CSIRO has done well, particularly in agriculture, but not greatly elsewhere. In CRCs, there was the first step by government in Australia to try and force research to link with commerce and that is having some measures of success. You have mentioned that you are commissioning a study to try and get the capital sector interested in partnering up in research. Is any of that work being done with the superannuation funds who would seem to me to be a logical starting point with long-term patient capital. On the other hand, I do not see any evidence from them that they are racing into these sorts of fields.

Mr Sedgley —No. Certainly that group of investors are the ones that we are talking to. What the ARC is trying to do with that project is to marry the opportunities that are being generated through the research that the council funds with the needs of investors who are putting funds into early stage activities such as the ones that the ARC supports. We are trying to build a bridge between the investment community and the research community. If you like, we are attempting to enhance the brokerage role that the council performs. We see that there is a lack of information out there. We believe that we can enhance the extent to which the investment community interacts with researchers simply by providing a lot more and richer information about the sorts of outcomes that are being generated through the research that the ARC is funding.

Mr O'KEEFE —In any of your work with overseas organisations, do you have a feeling that those sorts of investors—or that sort of investment base—is more interested in early stage research than Australia? Why is it that it is done better overseas? Are the tax breaks better? Have investors had more experience? Are they more skilled at it? Can they spot something happening earlier? Why is this something that is done well overseas but not done well here?

Mr Sedgley —It is done reasonably well in Australia and there are a number of successes that you can point to. Where the council is coming from is the perspective that a lot more could be done. It has been demonstrated that in the last few years there are a lot more venture capital funds being made available within this country. The task now as the council sees it is to ensure that that investment source has good links into opportunities at an early stage here in Australia.

CHAIR —On that point, what are the barriers to commercialising university research—other than what you mentioned?

Mr Sedgley —I think there are a few barriers there. Traditionally, it has been argued that researchers in Australia perhaps have not had the orientation towards pursuing commercial outcomes as in other countries. Perhaps that comes down to incentives within universities; that is changing. There is an argument to suggest that there have not perhaps been the number of receptors within industry in Australia to pick up the sorts of opportunities that are arising from research as in other countries. There is an argument that that is based on the industrial structure within Australia.

Mr O'KEEFE —What you mean by that? Is it that the parent companies are offshore and therefore they do not have an interest in us doing it here? Do you mean that home-grown companies are not used to it or what do you mean by that?

Mr Sedgley —What I am suggesting and as I understand the argument, traditionally the Australian industrial structure has been focused in particular areas. For example, Australia has a long tradition and strength in agriculture, mining and in areas of manufacturing. With the developments in scientific research in the last 20 years in areas like, for example, biological sciences, biotechnology, Australia does not have the sorts and size of companies in areas such as pharmaceuticals who are in place locally to be able to pick up the sorts of advances that are being made in the scientific realm.

CHAIR —Do you have a view as to how we get there?

Mr Sedgley —I think there is a good argument for a country the size of Australia, with a strong scientific base in certain areas, to make sure that it has very strong international links. It is absolutely critical. It is a key consideration there. We have to have researchers in Australia interacting very closely with the best researchers world wide.

CHAIR —Because of that problem, do you see a danger for Australia that we will lose our researchers overseas, simply because they can take it to that next level?

Mr Sedgley —It has been demonstrated that in recent years there has been a level of investment in other countries that would obviously have been attractive to researchers in Australia. There have been some concerns in recent years about the level of salaries. We have seen some initiatives recently in the government's Backing Australia's Ability statement to address concerns in those areas. There are some very fine initiatives there which will go a long way to addressing those sorts of concerns.

The other point to make there is that it is important that our researchers do get international experience. The critical thing we want is for them to return to Australia once they have had that experience. It is absolutely imperative that we can offer competitive resourcing for the best of our people to ensure that we can bring them back.

Mr BAIRD —I am interested in two things: what further incentives do you think we as a country need to be doing to ensure that we have significant growth in research and development of the country; secondly, the extent to which you can point to similar models or models overseas of where this is done, which have resulted in significant changes to the benefit of a country's economic development and research programs et cetera? It is really what we can learn from others that we are particularly interested in, as part of this process today.

Mr Sedgley —If I can possibly oversimplify things, I think the two critical areas that the council has focused on are firstly, people; you need the best people. Another area is concerned with the scale of the research effort that is being mounted. It is absolutely critical to the national research capacity that you have an ability to attract and retain the best and brightest that you produce within Australia. It is critical that we have the ability to offer attractive salary packages to leading scientists and researchers. It is important that we are able to back that up with leading-edge infrastructure to allow them to do their work.

If you are able to attract the best people and provide them with the facilities that they need, what they then become is magnets for the best and brightest students—not only those early career researchers coming up through the systems within Australia but postgraduate students from overseas. So you start to build a scale of activity with leading researchers and research students; the best infrastructure concentrated in one area which can then develop a high profile, both nationally and internationally, and is in a position to make significant and productive links with similar research centres internationally. This is critically important.

Mr BAIRD —It is a question of who does what. If we look at somewhere like North Carolina with the research triangle which has partly got the universities and the private sector involved, as I understand it, there is no direct government involvement in those processes and yet it is a real magnet for research activity to be carried on. We are really looking for what role the government should be playing and what models you can point to that we should be looking at.

Mr Sedgley —Perhaps a new model for Australia and one which is emerging at the moment is exemplified by the approaches being adopted in Victoria and Queensland. In Queensland it is through the Institute of Molecular Bioscience, which is centred on the University of Queensland. That initiative is being supported through investments by the university itself and also the state government. They have industry partners involved and they also have the involvement of the Commonwealth Scientific and Industrial Research Organisation. As I understand it, that investment in total is of the order of $100 million.

There is a similar initiative occurring in Victoria that goes under the name of Bio21. Again, that is an investment in total that is coming from the state government; the University of Melbourne; a number of industry partners; the medical research institutes in Melbourne and also the hospitals. What you are seeing there is a recognition that if you want to be a world player where Bio21 is concerned—particularly medical biotechnology - then you have to get all of the players and the stakeholders involved. You have to get the collaboration going and you have to get industry into it. But there is a need for government support recognised in both of those initiatives to provide for the basic research that underpins that activity. In both of those cases, the stated aims include commercialisation of research, so they have a clear commercial focus. But to be able to do that, both have recognised that you need this foundation of basic research to generate the ideas.

Mr BAIRD —Are there places you can point to overseas which are involved in similar types of programs which you would see as a model for us?

Mr Sedgley —I am trying to think of one. One that occurs to me is that the Japanese government has invested heavily in the area of biotechnology in recent years, particularly in infrastructure and particularly in basic science to underpin the biotech industry in Japan. In Japan you have a similar model of collaboration between government to fund the basic science and industry to come in and give a spur to the commercial orientation for the outcomes of that basic research.

Mr BAIRD —When you talk about people being important and the salary packages being underwritten, are you talking about keeping Australians in the country or bringing people in internationally?

Mr Sedgley —I think both. As one example, the Federation Fellowships that were announced in Backing Australia's Ability will provide a salary level which I think we will see is able to retain the best researchers we have in this country. Anecdotal evidence from people within the Australian Research Council who manage the implementation of that program and talking to people who are interested in applying for those positions, the suggestion is that there is a lot of interest in those fellowships from people overseas; that is both expatriate Australians who are working internationally and also people from overseas.

Mr BAIRD —What figure was that again just to remind us in terms of our discussions? What type of dollar figure are we talking of in terms of salaries?

Mr Sedgley —The Federation Fellowships: just let me check to make sure I am giving you the right figure.

Mr BAIRD —As a second part of that, do you think that is now an adequate figure? It sounds like you do. It is $225,000. Jane Vincent has found it.

Mr Sedgley —That is right. I had that figure in my head but I just wanted to make sure.

Mr BAIRD —No, it is interesting. If you are attracting the Americans, for example, when it is $US110,000, is that enough?

Mr Sedgley —That remains to be seen. The information we have to hand suggests that of the publicly funded salaried research positions around the world, Federation Fellowships are right up there in the top bracket.

Mr BAIRD —Good, that is a plus.

Mr O'KEEFE —On that last point, it seems that in a sense the public sector has already lost this race. If scientists are the same as bankers and everybody else—and that is, they will chase the best dollar and the best conditions and the best people to work with—it is generally the corporate sector that is paying what it is that attracts them, isn't it? So with respect to this partnership with the private sector, we have all tended to place a lot of focus on how we keep the public sector in the game in Australia because it has been very successful for many years. With respect to what you seem to be saying about the partnership with the private sector globally and the exchange of people, in some cases you might not get Australians to come back. My son is a classic case. He is in California and has married an American. He will never come back to Australia but I hope his ideas do—to someone he is in liaison here with. We have got to work out way through that. I really wanted to ask what is the situation in countries like New Zealand and Canada which seem to be countries that have a lot of things in common with us—Canada in scale, New Zealand in style? What is their situation with research?

Mr Sedgley —Australia and Canada would compare very closely in terms of the quality of their research base, their outputs and the degree to which those outputs are taken up by industry. It is interesting that the Canadians have recently made a major push to ensure that they are able to retain and attract the best researchers world wide through the funding in the order of a few hundred professorial chairs on very high salaries. Those salaries are broadly comparable to the Federation Fellowships that I mentioned earlier. So I think there is a sense in which countries in a similar position to Australia are making that judgment that it is absolutely critical to their own national capacity they need to be able to attract those sorts of people. Those are the sorts of initiatives that are being put in place. If you are going to attract the best people, you also need to be able to provide them with the best possible facilities. You need to be able to fund them to a level such that they can attract teams of researchers around them with postgraduate students, postdoctoral fellows.

Mr O'KEEFE —What about New Zealand?

Mr Sedgley —I have to say I am not closely familiar with what the New Zealanders have been doing in recent years. I am not aware of initiatives similar to the sorts of initiatives we have seen recently in Australia and we have seen in Canada. But that is not to say that they have not occurred. I guess my focus has been elsewhere.

CHAIR —You mentioned the ARC Centres program. How long has the program been going? What opportunities beyond the examples given in the submission are there for further collaborative work?

Mr Sedgley —The ARC Centres program has been going for a number of years now. I do not have the year in my head as to when it began. I could certainly provide that information to the committee. What is interesting is that we are seeing outcomes from a number of centres that were first funded in 1991 that are very encouraging in terms of demonstrating the sorts of benefits that can be achieved from funding large scale activities of this sort. As one example, the ARC first began supporting a centre at the University of Western Australia in 1991. That was the Centre for Advanced Minerals and Materials Processing. The committee may be aware that recently a spin-off company from the research that came out of that centre has entered into a joint venture with the Korean company Samsung Corning. That company is pouring millions of dollars into securing the development of the technologies which came out of that centre in the area of nanopowders, which are critically important to a number of manufacturing processes and have wide applications. Samsung Corning are investing in that technology and the research that underpins it to ensure that they can hold a major share of the world markets in nanopowders. The point I am trying to make here is that it is these large scale activities that are able to generate the sorts of commercial outcomes that we are really striving for and starting to see, particularly in recent years, from a number of ARC funded centres and a number of CRCs.

Mr O'KEEFE —You mention the infrastructure base: have you got particular things in mind? Are we talking here about labs, or staff, or computers? I mean, the traditional concept of a research centre is people wandering around in a room with white coats doing smart things. Has research moved on in its layout? Is it the ability to go to various locations and see things and develop ideas from? I well understand the skills when you say, `If we are going to attract the best researchers, you've got to back them up with the best skills and the best infrastructure.' What do you mean by infrastructure?

Mr Sedgley —In its submission, the council mentioned the fact that Australia does not have a major international research facility. By that, the council would mean a facility that is a hub of research activity for the international research community.

CHAIR —Doesn't the CSIRO almost fit that?

Mr Sedgley —I am thinking more of facilities specific to a particular research discipline. An example that comes to mind is the Gemini telescopes that have been built by a consortium of countries including Australia; one telescope in Hawaii and the other in Chile. Those two facilities are state-of-the-art astronomical facilities. It is critically important that Australia has been able to get a foot in the door to those facilities.

Australia has recently been involved in a bid to secure the location of the Global Biodiversity Information Facility here in Australia. I understand that a decision was made on that on the weekend but I have not heard the outcome of that. That is another example of a facility that would be used by the international community; people would come to Australia to use that facility.

Another example might be an international proposal at the moment to establish a square kilometre array radio telescope. There is some chance that Australia may be in the running to place a competitive bid for that facility as well. We are talking about facilities within particular disciplines that are unique in terms of being at the forefront of technology.

CHAIR —Following on from that, does our funding almost discourage what you mentioned? We have got state, we have got federal, we have got some universities, some private corporate rather than channelling it all through— because governments tend to be the beast that if they put money in they want to claim all the credit. Does that take away from the view that you are putting? Can we do it better?

Mr Sedgley —Yes.

CHAIR —If so, how, in your view?

Mr Sedgley —Yes. There is a sense in which we could do better in terms of concentrating resources in areas where we have a competitive advantage and where there are particular opportunities emerging. There have been many arguments made that in the past the research effort within Australia has been more fragmented that it need be; that resources are spread perhaps too thinly. Again, this comes back to the size of Australia and its ability to generate the resources to cover all bases.

There are arguments being put that we need to concentrate resources in a much more focused way in those areas where we genuinely have a competitive edge. One way to do that is collaboration. For example, at the moment the council is working very closely with the rural research and development corporations at possibilities for joint investment in areas such as agriculture biotechnology. If you can get organisations such as the ARC and the research and development corporations putting in joint investments in those areas, then you can really start to build a level of investment that can create research programs that can really make a difference.

The real benefit of that sort of collaboration is that you have got the linkages in place between the basic science at one end of the spectrum, and the users of research at the other end—that is the industries that are actually putting their funds into the sorts of activities that the research and development corporations undertake. So you have got a significant investment in basic research and you have got also a significant investment from the growers, for example, in the case of grains. That starts to bring a commercial orientation towards the basic research. I am not saying that it drives the basic research but it certainly gives it an avenue for expression.

Mr O'KEEFE —I have held the view for some time that that is the place to start to attract some of the bigger capital players, because the contribution can easily be multiplied and it is so direct. I mean, the grower contributes a dollar and the government contributes a dollar towards the R&D; if you come into it as well and then you bring a capital partner, you are not messing around with tax deductibility, R&D and 150 and 125 and all that stuff. It is a straight multiply up. I would have thought smart agriculture was the easiest place to get your collaborative economy of scale and to get the capital partners interested in seeing what can be done. They are not there yet but I would encourage you on that track.

Mr Sedgley —Yes.

CHAIR —I want to thank you for attendance here today. If you have been asked to provide any additional material, I would appreciate it if you would forward it to the secretariat. You will be sent a copy of the transcript of your evidence on which you can make corrections of grammar and fact. As Hansard may need to check something, I would ask you to just check with them on the way out. I thank you for your attendance.

Mr Sedgley —Thank you very much.

[10.44 a.m.]