Mr McGAURAN (Minister for the Arts and the Centenary of Federation) (4:02 PM) —It is good to have a debate like this. It is a crucial issue to the social and economic welfare of Australia in the near term and in the long term. But I cannot help noticing that there have been no questions and no similar debates over the two years of this second term of the Howard government. It is suddenly brought before the House, with only one question asked in question time earlier today. You do have to question, even doubt, the sincerity of the shadow minister and the opposition at large in putting this matter down. It reeks of opportunism, given the latest figures on investment in research and development in Australia. If they were really concerned about the issue, we would have had a number of debates or questions or pursuits in this House.

Mr McGAURAN —The figures came out yesterday, but why hasn't the opposition been preparing the House for a debate of this seriousness, this magnitude? It has neglected this crucial policy area in research and development, science and technology, innovation and information technology, as it has in all other areas. The shadow minister's contribution to the House just now was superficial, even glib. He has given a speech that I have heard countless times before by undergraduates almost—not in this House but by people who have but the barest notion or understanding of science and technology. It is all just a giant whinge of the most generalised kind. He does not proffer any real analysis of private sector, let alone public sector, investment in R&D. It is just a series of complaints which do not even stand up to close examination, let alone any policy alternative minus any possibility of costings.

He starts off by saying that in the 1996 budget, which had to deal with Labor's $10 billion deficit inheritance—that is what we had to deal with on coming to government, which Labor had covered up and on which Labor had totally misled the Australian people during the election campaign; we had to make good that deficit—there were reductions in government expenditure. But I can say with authority, because I was Minister for Science and Technology at the time, that that portfolio was spared almost like no other. We did not see the cuts to public agencies that he spoke about. What agencies were cut? CSIRO received an extra $20 million per year funding for each of three years, for instance. He spoke of the part-time chief scientist. That was a deliberate policy initiative because we wanted to get a working scientist from the private sector, and it was Professor John Stocker who brought great distinction and credit to that position. Nobody would say he was anything less than a very true and faithful advocate and champion on behalf of science and technology. Now we have Dr Robin Batterham, who is also from the private sector. That is why the position was not filled by an academic or a retired scientist or a public servant from the science areas as was previously the case. There is no criticism there.

The shadow minister spoke of HECS for science students. Of course, the prediction in 1996 by the honourable member and others of the opposition was that there would be an absence of science students because of HECS, that we would see a drying up of science applications. That has not happened. They were predicting that we would have no science students to all intents and purposes. In any event, is the honourable member committing to relieve the HECS of science students ahead of students for education or for the arts who also do not always have a guaranteed career path like a doctor or a law graduate? Let's be blunt about this: is this a commitment by the opposition to exempt or relieve science students from HECS? He spoke about the 150 per cent tax incentive reduced to 125 per cent—a direct result of Labor's deficit. Again, is he committing to increase the tax concession back to 150 per cent? You cannot complain and whinge and criticise government decisions unless you are prepared to repair them if you think it makes good policy. The reason the Labor Party will not do that is that those decisions were sensible and necessary, even improvements and reforms at the time.

The Labor Party's criticisms ring hollow; they do not have credibility. When I was in opposition, and I was there for 13 years, there was always a credo: `Don't stand up and attack the government if you do not have clean hands, if you are not prepared to make good the criticism you are making; otherwise you are just an opportunist and a political point scorer.'

For some reason that I still cannot fathom, even on further reflection, the honourable member made a criticism of the Treasurer for his preoccupation with taxation. The basic law of business investment and R&D is that it is funded out of profit. Every company you go to—mid size or large size—funds R&D out of profits. You must make a profit, so the lower the company tax rate the greater the amount of funds available to invest in high risk research and development or to provide that patient capital that is necessary. Consequently, our tax reforms are crucial. We have reduced company taxation to 34 cents in the dollar and in 12 months time that will go to 30 cents in the dollar. That is an extraordinarily low taxation rate for OECD countries, and that will provide a great incentive to companies to invest in R&D. We have reformed capital gains tax. We are proud we are preoccupied with taxation, in this area especially, because in IT and in telecommunications this was the catchcry of the last three years: `There is a lack of investment because capital gains tax is too high and strips away any profit incentive.' We have dramatically reformed capital gains tax.

I do want to address the matters of substance regarding this issue of private and public sector investment in R&D, but I cannot do so before despatching the opposition's contribution. If they are not willing to properly analyse the issues but instead indulge in exaggeration, hype and overstatement of their case, we will get nowhere because the decreases in business expenditure and R&D and gross expenditure and R&D are of concern to the government. We do not doubt that. Senator Minchin, the Minister for Industry, Science and Resources, issued a statement yesterday on the release of the Australian Bureau of Statistics figures acknowledging that the downward trend was a concern for him, but he ruled out the simplistic and misleading explanations attached to it by the Labor Party. Having anticipated this issue, several months ago the government set up the National Science and Innovation Summit which was a very powerful way of moving forward on the issue, of galvanising the private sector in partnership with public sector agencies and bodies to examine how government and business support for R&D can be expanded, encouraged, made more effective and give greater returns to taxpayers. The implementation group which arose out of the innovation summit has been closely examining all these issues under the leadership of chief scientist Dr Robin Batterham. That important input will be put to the next meeting on 30 August of the Prime Minister's Science, Engineering and Innovation Council. So the government has these matters in hand. We acknowledge the problem. We reject Labor's scaremongering on the issue.

Mr Martin Ferguson —You are going to the football or the National Library? What are you doing on Saturday?

Mr McGAURAN —The honourable member is interjecting. I will be home in my electorate on grand final day. Are you going to the grand final in Melbourne?

Mr DEPUTY SPEAKER (Mr Nehl)—Order! The minister will address his remarks through the chair and ignore the member for Batman.

Mr McGAURAN —The hypocrisy of the Labor Party on all issues, let alone one regarding corporate hospitality on grand final day, is mind-boggling. I will be in my electorate in Gippsland on Saturday, on grand final day, so your interjection is typically inaccurate. Mr Deputy Speaker, I should continue, but in actual fact the honourable member is a good contributor to the council of the National Library. He is giving up his grand final day to attend that council meeting. I am very impressed. I think credit where credit is due.

Mr DEPUTY SPEAKER —That is very kind of the minister, but the chair is not impressed and would prefer that you stick to the subject of the discussion.

Mr DEPUTY SPEAKER —And would invite the member for Batman to be silent. I know it is a big ask.

Mr McGAURAN —Let us see how the government has been responding over the last few years to this vexed issue of business investment in research and development. We have put $600 million into the R&D tax concession scheme this year, which is an increase of $50 million from last year. We have the very sensible research and development START program to the tune of $155 million in the current financial year. So the government is focusing on real R&D—not on R&D syndication tax dodges which artificially increased the figures and which the opposition, if they are to be believed, will reinstate. Instead, we are looking at ensuring that small and medium sized companies get a direct benefit, and much of this is by way of grants as well as interest-free loans and the like.

To put this in context, in the United Kingdom—from which Labor borrows or steals most of their ideas—there has been a very significant fall in gross expenditure on research and development as a percentage of GDP since 1993. It has declined from 14 per cent to 1.83 per cent in 1998. We have increased funding to a record $4½ billion for science and innovation programs. We have strengthened the venture capital market for start-up companies through the following programs: the Innovation Investment Fund and the Commercialising Emerging Technologies program, known as COMET. That has led to increased investment in start-up companies of 148 per cent, to $236 million. We now have a doubling of total venture capital investment in Australia to a record $971 million over the last two years. They are very impressive figures. It is not all doom and gloom as the shadow minister portrays. Rather, the government has put very strong support, backed by taxpayers' funds, in the most carefully targeted way into companies. The extent of investment by business in R&D still exists and is an issue to be tackled further by government, and we are looking forward to the recommendations of the innovation summit's working party.

The fall in business expenditure in research and development is also a problem for the business community. No matter how many times we tell them that an investment in R&D is an investment in profitability for a company, it does not always fall on receptive ears. Too often, it falls on deaf ears. Businesses also have to realise it is in their self-interest to invest in R&D, to provide a competitive edge, not just against domestic competitors but even against international competitors as the economy is much more global.

To maintain the growth dividend from research and development, our effort is expanding, because there is a clear market failure which the government is going to fill. We do not doubt for a moment that business expenditure in research and development is disappointing—and worrying to a large extent, though not to the point the opposition, with their hollow rhetoric and empty claims, would have us believe. They have no policy, they have no solution and they will not cost a single promise they make. They feel free to make any criticism, believing it is without consequence. But the shadow ministers assembled today should know that we are keeping a tally of their promises. Every time you make a criticism with an implied correction of the fault you are alleging, it is not going without notice. We are putting dollar amounts on it and, in the same way as, during the national conference in Hobart, you blithely, recklessly and irresponsibly produced these empty pieces of paper—brief, thankfully, easier to read—

Mr Martin Ferguson —Your caucus approved a billion dollars of road funding last night. Is that right?

Mr DEPUTY SPEAKER —Order! The minister has the call.

Mr McGAURAN —Mr Deputy Speaker, I do need some protection from the aggression.

Mr DEPUTY SPEAKER —The member for Batman should zip his lip.

Mr McGAURAN —Thank you, Mr Deputy Speaker. Drawing to a conclusion, I want to say that this is an attack by the opposition that has fallen very flat. The opposition has no credibility; it has done nothing over two years to pursue these issues. The government, instead, has used the two years to tackle the problem of business expenditure on research and development. (Time expired)