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Tuesday, 29 August 2000
Page: 19522

Mr MARTYN EVANS (3:47 PM) —At the turn of the millennium, as the world is in transition from an industrial economy to an information economy, this government is wilfully and recklessly negligent in its lack of commitment to and understanding of the science and R&D issue. From its very first days in office, the Howard government mounted a relentless attack on our R&D capacity, with cuts to R&D expenditure for the public sector agencies, a reduction in the major R&D tax concession from 150 per cent to 125 per cent, the abolition of syndication, and making the position of chief scientist part time. If anything reflects a strong message to the private sector and to the community about the lack of commitment which this government had to science and technology in its early days, it is the message that it made the chief scientist of Australia a part-time position. What stronger message could it send?

It went on to cut the expenditure on infrastructure and universities and to ensure that those who had the temerity to undertake a science education in this country were required to pay far more in HECS fees for the privilege. It increased the HECS fees for science, sending a very strong message to students that they should not study science or, if they did, they had better be prepared to pay for the privilege. Its negligence amounts to nothing less than an attack on our capacity as a knowledge nation.

This government has, in recent days—in fact, through most of its time in office—been entirely obsessed with taxation. It has been obsessed with taxation at a time when it clearly should have been focusing far more, if not all, of its attention on promoting Australia as a knowledge nation in order to advance our capacity for innovation and to ensure that the young people of this country are properly trained in science and technological development.

In his speeches about the GST and taxation, the Treasurer is fond of comparing this country with Botswana and Swaziland. The relevance of that is all too frighteningly apparent when we look at the way this country's expenditure on R&D is taking us further and further down the league table of countries in the OECD in relation to science and technology expenditure. This government has seen our position as a science and technology leader slowly deteriorate, year after year. Why is that so important? Because studies in the United States and elsewhere have shown very clearly that up to 50 per cent of wealth and job creation in developed countries is due to expenditure on science and technology, to innovation, to research and development, and to the educational standards of young people being relevant to science and technology. Fifty per cent of the economic development of those countries can clearly be attributed to their expenditure on R&D and their commitment to science and technology. And yet this government moves further and further away from any serious commitment.

The recent report of the chief scientist, The Chance to Change, shows clearly that innovation is the only way forward. He states:

Innovation is the driver of every modern economy—it is the key to competitiveness, employment growth and social well-being.

The cycle of innovation must be fed by new ideas and basic knowledge, and be capable of being transferred and accepted by end-users.

That makes it clear that we must spend our national resources on advancing the science and technology capability of our universities and of our industries.

Recent figures from the ABS, which came out only yesterday, show that the gross expenditure on R&D in this country is now back to the levels of the early 1990s. The gross expenditure on research and development as a percentage of GDP has levelled off from 1998-99 and is now at 1.49 per cent, after steadily increasing during the two decades of Labor and before, to a peak of 1.67 per cent in 1996-97.

Under this government it has been falling consistently at a time when countries like Japan, the United States, Canada, Finland and most of the countries of Western Europe have been steadily increasing their commitment to R&D as a percentage of GDP. A few figures are instructive. Japan, for example, in the period when our commitment fell, has increased its commitment to R&D as a percentage of GDP from 2.8 per cent to 3.06 per cent in the same comparable period. The United States has gone from 2.6 per cent to 2.7 per cent. Canada, a country with which we are directly comparable—they, like us, originally had an economy which was founded heavily on resource development—also increased their expenditure as a percentage of GDP during the period for which figures are most recently available. Indeed, in their most recent budgets, which have occurred subsequent to those figures being compiled, they have demonstrated an even stronger commitment to R&D, with massive increases in their grants to industrial research and development, to medical research and to the universities. Australia, of course, has unfortunately—as the Leader of the Opposition indicated during question time—now achieved the distinction of the worst outcome of the 17 OECD countries that were measured in a recent survey. This country is going backwards in the area of R&D under this government.

The Prime Minister, in his response to the Leader of the Opposition's question, indicated a degree of surprise at those figures and said that he wanted to spend some time with his government considering just what might be the reasons for that decline in R&D expenditure. If you look at the figures on the graph of year-on-year expenditure, you see a very strange and remarkable coincidence, one which the Prime Minister should examine a lot more closely. The fact that he has not done so in the first five years of his term of office is something of an indictment of him. The graph clearly shows a rising level of expenditure until the year his government came to office and, after that, it shows a remarkable year-on-year fall in expenditure. I do not know whether the Prime Minister thinks that it is just a coincidence that the graph was rising until he took office and falling from the day he started. It could be attributable to those measures which I indicated earlier: the slashing of the R&D tax concession, the abolition of syndication, the very strong message to the business community that he does not regard R&D expenditure as being that important. It could be some of those reasons. I do not think the Prime Minister need look much further than his own policy manual and his cabinet records to find the reason he seeks for the declining R&D expenditure. The Prime Minister at the innovation summit asked us to judge his government on its record in the area of innovation in science and technology. Both the Australian Bureau of Statistics and the OECD have carefully catalogued the record of this government, and it is an appalling and shameful record. It is one on which the Prime Minister, at his own request, will stand condemned by the community.

Innovation is critical to our economic growth and our progress as a nation. If we want the kinds of high skilled, high wage jobs of the knowledge economy for the next generation of young people in the new century, we have to get a lot more serious about innovation. The chief scientist's report underlines very clearly the strong link between innovation, companies and growth. Those companies that are innovative and invest in R&D are the companies throughout the world that are subject to growth and are able to improve their employment and to offer their workers skilled and well paid jobs. In the past, it was capital, labour and materials that were the determinants of economic success. But, in the knowledge era, the knowledge of individual members of our work force and the educational skills of our young people are the assets in which we must invest most strongly. They are the assets which will deliver the growth outcome that this country requires in the next century if we are to remain competitive. All of those countries with which we would traditionally compare ourselves—even those countries that have a strong resource base, like Finland and Canada—have achieved very substantial growth because of their strong commitment to R&D. Even a small country like Finland, which certainly has much to commend it because their investment in R&D has been very strong, is now at a level of 3.1 per cent of GDP compared to Australia at 1.49 per cent and declining, and Finland shows the benefit of that investment in R&D.

Thirty years ago, knowledge doubled every 14 years; now it doubles every seven, and the rate of change and growth of knowledge is increasing at an ever faster pace. This runs the risk of leaving members of the community behind. Any community that does not invest in education, research and development and technology will certainly be left behind in the knowledge economy. It is not only the case, though, that private sector investment in R&D has, as the ABS so clearly demonstrated, been falling quite dramatically; the government's public sector commitment has also been declining. This country used to have a very proud record of public sector investment in R&D. Indeed, Australians have always been—justifiably so—very proud of the CSIRO and the other public sector science agencies, such as the Australian Institute of Marine Science in Townsville, which the Leader of the Opposition and I recently visited. But, at a time when the Australian Taxation Office is gaining an extra 3,000 plus staff in this year's budget, the CSIRO is to lose 133 staff. If ever the budget papers revealed a misallocation of resources it is in that area, so starkly shown by the increase in staff in the Australian Taxation Office—from a government obsessed by taxation—and a decline in the staffing of organisations like the CSIRO.

The Prime Minister and the Minister for Industry, Science and Resources have in their observations on these declining R&D figures pointed to the decline in R&D commitment by the mining industry, and they indicated that perhaps this is due to a decline in commodity prices. Of course, they are under threat because of the decline in commodity prices. But how does this government respond to a decline in R&D commitment by the mining sector with its own commitment through the Australian Geological Survey Organisation? Does it increase expenditure for AGSO at a time when you might think it might want to be countercyclical to the industry and provide for additional pre-competitive research? No, the government cut expenditure for AGSO. It reduced AGSO's staffing by something like 25 per cent at a time when the mining sector is suffering hardship because of those declines in commodity prices. So, although the government could clearly make a strong commitment to public sector R&D and ensure that pre-competitive research is freely available to the industry, it responds as it has in the case of CSIRO and as it has in the case of the universities: by further cutting its commitment to public sector R&D.

The evidence clearly is that public sector commitment has a rate of return of something between 125 per cent and 270 per cent per annum. So when the government invests a dollar in public sector pre-competitive R&D it guarantees to the community a return of nearly $3 for that $1 invested. That rate of return is very critical because the private sector is always reluctant to commit in an area which has gains that are spread so much through the community. The private sector will always demonstrate market failure in the area of R&D because there are short-term costs and long-term benefits, there is high risk and there is a strong element of social return. It is very difficult to capture for the individual firm the sole benefits of private sector and, indeed, public sector R&D. When countries like the United States have, since 1993, increased their public sector commitment by 45 per cent, and when the United Kingdom and Canada have done the same, Australia is mounting a dignified retreat from its higher levels of R&D expenditure and is causing organisations like CSIRO to suffer the death of a thousand cuts, dollar by dollar, staff member by staff member, scientist by scientist. Our public sector commitment has been reduced. Even today the government is forcing CSIRO to endure IT outsourcing.

The recent chief scientist report indicates that, as we move into the 21st century, we must be a nation committed to innovation, we must be a nation committed to investing in a vibrant R&D sector and we must be a nation committed to developing a highly skilled work force which is able to address the needs of the knowledge economy. The failure of this government to provide the leadership necessary to steer us in this direction in an information age is a condemnation of their public policy attitude. The price will be very high indeed, and it will be paid by the next generation of Australians.