Ms CORCORAN (1:30 PM) —This Riding the innovation wave: the case for increasing business investment in R&D report is the result of an inquiry held over the last 12 months by the House of Representatives Standing Committee on Science and Innovation. The underlying contention is that businesses, both large and small, need to be encouraged to undertake more research and development. The inquiry found that about 1.5 per cent of GDP is spent on research and development in Australia each year, with businesses contributing about half of this effort. Government and higher education institutions do the balance of the R&D at about equal amounts—higher education being slightly ahead on 0.41 per cent of GDP, with government on about 0.35 per cent of GDP. For the sake of completeness it should be noted that the government's contribution is understated in this analysis, for two reasons: first, government grants to business or higher education for R&D are reported in those two categories and not as government expenditure; and, second, tax concessions are not recorded in any of the above figures.

The report shows that Australia is behind a number of other countries in the OECD when it comes to business expenditure on R&D; this ranges from 2.84 per cent of GDP to 0.25 per cent, with Australia sitting on 0.72 per cent. At the same time, the World Economic Forum has ranked the competitiveness of 75 countries by using a number of different factors. In this ranking Australia is sixth in terms of tax credits for R&D in business and eighth for subsidies for R&D in business, but it is 23rd for business spending on R&D; and 35th for business innovation.

Despite this data, the most often repeated plea from the larger enterprises which gave evidence boiled down to `send more money'—essentially, a call for greater tax incentives. This contrasted markedly with the evidence from smaller enterprises, who said that the tax and grants regime meant little to them, for reasons I will talk about a little later. The other point made frequently by both large and small enterprises was that access to a reasonably large market was critical to R&D. A reasonably sized market requires access to overseas markets, so attention to export opportunities is critical to quality R&D. SMEs also noted that they are often, or even usually, denied access to the large government procurement market and that efforts are needed to open up government purchasing to allow SMEs access to this market.

It is clear through evidence we received and also through discussions I have had with SMEs in my electorate that tax concessions and government grants are of limited use to SMEs. We heard about `glass hurdles' that exist for SMEs trying to access government grants. One of these hurdles is the paperwork. Many SMEs do not have the administrative resources available to prepare the extensive reports that are required in advance of any flow of government funds. We heard that the paperwork associated with a R&D application is seen as a built-in bias towards larger organisations. The second hurdle is the lead time required to access government funds. We heard that, for many SMEs, situations develop quickly which require solutions to be found within tight time frames. These time frames do not allow the SME to apply for and receive R&D funds.

During the inquiry we heard evidence from many different organisations who took the time to come to Canberra to talk to us. It became clear, however, that we were not getting evidence from small or medium sized companies. It was important to us that SMEs got the chance to give evidence; as they were not coming to Canberra—probably because they were too busy at the coal face—we decided to go to them and to be available at a time that suited small businesses. So we organised three roundtable discussions especially for SMEs. We travelled to Adelaide and Brisbane on the one day and also managed to fit in a teleconference to a number of SME business people assembled in Melbourne. I want to thank my fellow colleagues on the committee and secretariat staff for going to that trouble.

These roundtables proved to be very useful, and I want to put on record my thanks to those who participated. Representation at the Melbourne teleconference was very ably organised by Steve Chapple, the Economic Development Manager at Frankston Council, and Suzanne Ferguson, the Economic Development Manager at Kingston Council. I would also like to thank those who participated in that roundtable, but unfortunately time does not allow me to name all of them today. I also want to put on record my appreciation for the work done by the chair of this committee and also by the secretariat. The inquiry was conducted over 12 months, and it is a credit to their hard work, dedication and focus that this report has been prepared today in such a complete and timely way. I recommend the report to the House.