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Tuesday, 26 February 1985
Page: 177

Senator McKIERNAN —My question is directed to the Minister for Industry, Technology and Commerce. I refer the Minister to the Prime Minister's policy statement of 13 November last, in which he stated that a 150 per cent tax concession for expenditure on research and development in Australia would be made available. What reaction has there been within industry to this proposal and when will we see it implemented?

Senator BUTTON —There have been, of course, some initial reactions within industry to the proposal. But before one attempts to gauge a final reaction the proposal will have to see the light of day in terms of specific proposals which are available for industry to rely on and ultimately in terms of legislation. The reaction was generally favourable because it is widely recognised that Australia must improve its industry performance in respect of research and development, particularly in the private sector.

Public sector expenditure on research and development in Australia is high by international standards. About 80 per cent of total funds invested in research and development in this country is spent in the public sector, whether it be by the Commonwealth Scientific and Industrial Research Organisation or other bodies established by governments either at the Commonwealth or State levels. In most Organisation for Economic Co-operation and Development countries, shares of research and development investment are more or less equal between the private sector and the government sector. In Australia there was a significant fall of 40 per cent in private sector investment between 1973-74 and 1981-82. It is most important that that trend be reversed. It must be reversed if Australia is to have modern and competitive industries which are capable of adjusting and changing. It is certainly important in terms of Australia's export manufacturing interests if Australian manufacturing is to provide a flexible and modern base for export activity.

The deductions which have been foreshadowed by the Government are in line with those offered by most other countries which purport to have modern economies and which are exporting high technology or medium technology products. It is high time, we believe, that such concessions are introduced in Australia. For obvious administrative reasons it takes a little time, because it is very important that tax incentives for research and development are not abused in the way in which tax incentives in other areas have been abused in this country. The rules and guidelines must be very strict. But I am hopeful that the system will start to operate from 1 July 1985, which is the logical date on which to commence the operation of such a system. The commitment made in respect of research and development incentives is quite separate from any other initiatives which may be taken in terms of business taxes arising from the current taxation review by the Government and is a quite express commitment in light of the Government's concern to raise the level of research and development performance in the private sector of the Australian economy.

In conclusion, I just draw attention to the very real gap which exists between research capacity in Australia and entrepreneurial capacity to match that research capacity. One of the important tasks is to try to integrate Australian research effort with developmental and entrepreneurial skills to ensure that the benefits of that research flow to Australian industry and not overseas.