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Thursday, 17 October 2002
Page: 5433

Senator CARR (5:28 PM) — The bill before us, the Research Agencies Legislation Amendment Bill 2002, seeks to amend two pieces of legislation, the Australian Institute of Marine Science Act and the Australian Nuclear Science and Technology Organisation Act. It essentially provides mechanisms whereby there can be greater autonomy by the agencies in terms of commercialisation and a reduction in ministerial supervision of them. There are a number of other minor matters that the bill attends to but I do not believe these are of particular importance compared to the more substantive issue of the government's commercialisation policies for these agencies, so I will be seeking to spend some time on that issue today.

On 20 September this year the Minister for Science, Mr McGauran, and his two colleagues Senator Patterson and Dr Nelson, released a report on Australia's comparative record of commercialisation of public sector R&D, and they tried to do that in the context of the international scene. When they were launching this report, the troika of ministers essentially put a brave face on what really is a very poor record of Australian research and development. The report, the National Survey of Research Commercialisation, was undertaken by the Australian Research Council, the CSIRO and the National Health and Medical Research Council.

For all the hype that was presented by these three ministers, the report on commercialisation basically said that Australia's performance in commercialisation of R&D was poor compared with other developing countries. As Mr McGauran said in his media release, there was a need to `improve our record of commercialising public sector research'.

This is an occasion when I would agree with the minister. He could not be more correct. Australia urgently needs to improve its record in this area, a record that—as measured by a number of indicators—has worsened significantly under the Howard government. For instance, business expenditure on research and development—an index which I think is widely known—has dropped since 1995 from a peak of 0.86 per cent of GDP to 0.64 per cent in 2000. While there has been a small growth in 2001, I think the overall trend is reflected in a decline.

The BERD measure had been improved steadily under Labor throughout the 1980s, particularly as a result of the taxation policies that were pursued with regard to concessions to companies for research and development. The other index, the gross expenditure on research and development, the GERD, has also fallen under this government and is languishing at about 1.53 per cent of GDP compared with a peak of 1.66 per cent four years ago. In terms of the OECD comparisons, Australia has slipped from 11th in world competitiveness to 13th in just two years. Ireland, Finland and Sweden do better.

Just recently we saw the Federation of Australian Scientific and Technological Societies, FASTS, produce a report, Australian science: investing in the future. I understand that Mr McGauran in fact launched this publication, so that would give it some authority I would have thought. The FASTS paper had, in my judgment, a lot to commend it, not least its emphasis on the shortcomings of the current government's approach to science policy. The minister had to acknowledge the status quo was deficient. He said:

The Government is committed to identifying and addressing impediments to the optimum performance of research in Australia, and addressing the challenges these issues pose.

The greatest impediment faced by research agencies in this country in regard to the development of research and development is government policy itself. The Federation of Australian Scientific and Technological Societies said:

The fundamental issue is the lack of a genuine whole-of-government national approach.

Professor Chris Fells said:

We need a national vision for science. The Howard government lacks the crucial underlying elements in its policies, and Australia is paying the price.

We have a situation where, in response, the minister said he was confident a long-term strategy `would emerge'—that was in the Australian on Wednesday, 25 September, this year.

The government acknowledges it does not have a national strategy. It says it will `emerge'. Frankly, I find that an extraordinary proposition. As a country we sit almost at the bottom of the list of similar developed countries when it comes to availability of venture capital, especially in a high-risk early stage capital that is so essential for making sure that we translate research into jobs. The government has no clear strategy to deal with this particular problem. The research and development Start program has stalled due to too much interest from industry. The willingness to innovate is out there but the support from the government itself is now lacking.

The centrepiece of the government's policy is Backing Australia's Ability. This set of initiatives was, I think, generally welcomed at the time, because it was seen to be an attempt by the government to at least put some of the money back in that it had taken out of the research community. We all know that the bulk of that money was back-ended— that is, it was loaded up for the tail end of quite a protracted period of time. It was in fact too little too late. Most of the funds were back-loaded until the end of that five-year funding cycle so very little has been seen from it since the time of its announcement.

At the same time as the launch of the FASTS policy paper, Minister McGauran announced that this government was reviewing the contents of the Backing Australia's Ability package and that he was prepared to `cull programs if necessary'. The government is essentially on the back foot when it comes to research policy and I think the minister's comments are indicative of the government's failure. We have seen other organisations such as the Australian Vice Chancellors Committee, the Australian Industry Group and the Business Council of Australia—all peak bodies—indicating that the government has acted poorly in this area and has failed the challenges faced by this country when it comes to research policy. Minister McGauran shot himself in the foot when he agreed to launch the FASTS paper on 23 September. It is not often that we find a minister prepared—and I say he is very generous—to go out there and welcome a paper that is so fundamentally critical of his government's approach and its inaction.

The commercialisation issue is an important one—it goes right across the research sector. In relation to AIMS in particular, the bill allows for the agency to borrow money and in turn to lend money for wholly or partly owned subsidiaries now to be known as `associated companies'. Although such transactions would require the approval of the Minister for Finance and Administration, the opposition has concerns about the way that these new provisions would act in practice and the potential to place Commonwealth funds at risk. This is particularly true when the institute's interest in the company concerned is not a controlling interest. The marine institute does not have the power formally to ensure that its funds are secure.

It is quite clear, within the public sector and the university sector in particular, that there is no research agency undertaking the commercialisation of research and doing it well. Particularly in the university sector, all too often we have seen relatively inexperienced commercial managers get their fingers burnt. We have seen bureaucrats and others, unused to the commercial environment, become involved in businesses and make mistakes—sometimes very costly mistakes. I am sure that when we get around to seeing it, the government's response to the report entitled Universities in crisis will detail their concerns about the failure of a whole series of corporate arms of universities to fulfil their obligations in this regard. Many universities have lost money in ill-conceived business dealings.

The Victorian Auditor-General has expressed concern about the lack of transparency and accountability for public funds associated with subsidiaries in business dealings of universities in that state. The state government in Victoria has taken these concerns seriously and has announced a range of measures designed to tighten up reporting requirements and to ensure public accountability for these ventures and activities. Collectively, we ought now to learn from some of these mistakes. The Commonwealth must ensure that, in loosening the financial and regulatory regimes surrounding commercial ventures, whether it be for ANSTO or for AIMS, it does not produce a situation where these mistakes can be repeated. In fact, we want to make sure that we do not throw the baby out with the bathwater. Too little regulation can create a situation where public resources are expended on agencies and potentially placed at risk.

The Business Council of Australia, in a paper contributing to Dr Nelson's higher education review and released on 24 September, had similar concerns. I emphasise that many of the positions taken by the Business Council of Australia are positions that we as an opposition strongly disagree with. Their concerns, however, about research commercialisation are matters that I think should be noted. In their paper they say:

International experience indicates a practical limit on the proportion of university revenue that can be generated from commercial activities in research and consultancy—a limit of less than ten per cent.

Beyond that point, universities would have to expose themselves to significant financial risk.

The same issues are relevant when it comes to publicly funded research agencies. We have seen the effects of too enthusiastic an approach to commercialisation with regard to the CSIRO. I know that this bill does not directly concern the CSIRO but the impact can be demonstrated if we are not careful. We see, for instance, that in the CSIRO's land and water division 26 scientists and technicians have recently been told they are losing their jobs. We know that 100 positions in the CSIRO will go between the middle and the end of the year. This is directly related to CSIRO management's concerns about their budgetary situation as a result of the failure to meet external earnings targets.

We know that the government has abolished external earnings targets with regard to the CSIRO, ANSTO and AIMS but, nonetheless, management within those agencies maintains that approach as part of a commercialisation strategy. The sackings have targeted scientific and other staff who work in core areas of the division. This undermines the CSIRO's capacity to undertake its core function—that is, public interest research. In areas such as salinity and land and water conservation there could be no more basic a proposition for the CSIRO. I ask whether or not such an example would not also apply to other agencies such as ANSTO and AIMS. Beyond the issue of financial risk, there is the possibility that public agencies' core responsibilities will be moved from the functions for which they have been created; namely, the provision of public interest research.

We have a further problem with regard to the failure of the government to fund these agencies effectively and appropriately. Part of the difficulty is built into the very indexation arrangements that apply to these agencies. Recently, I made my concern known about the differences in the indexation arrangements that occur. For instance, the indexation of funding for schools is 5.9 per cent, for higher education it is 2.2 per cent, for vocational education it is 1.6 per cent, for ANSTO it is 2.9 per cent, for CSIRO it is 2.6 per cent and for AIMS it is 2.6 per cent. I am certain that the management and the people who work in ANSTO would be delighted to have access to the same level of indexation as other divisions of the Department of Education, Science and Training in terms of the programs that they are operating. I am sure the same would apply to the marine institute: they would be delighted to have access to the same level of indexation that the other agencies have.

The opposition have a number of other concerns about this bill and they are spelt out in the second reading amendment. The opposition are not seeking to deny passage of this bill; we will be supporting it. However, we want to place on the record our concern at the government's failure to develop and set in place a coherent, national, all-of-government approach to research and development policy and, in particular, a national strategy on commercialisation. We believe that there should be a nationally consistent intellectual property and public research management policy. All of these things are currently lacking. Further, we seek to ensure that the commercial arrangements set in place for ANSTO and AIMS recognise that the policy responsibility for publicly funded research and for the funding of public-good research remains with the Commonwealth, and that commercially generated funds should supplement, rather than replace, public funding.

All too often, the impact is exactly the opposite. Research agencies are told, `You are to go out and make money on the side, and you are to use privately generated income to replace public funding.' By this means, the government is able to abrogate its responsibilities. The impact of that, of course, is to change the profile of many of our research agencies, be they the marine institute, the CSIRO, ANSTO or universities. The impact of that is also to undermine the quality of the programs that are run by those agencies, because the reporting requirements then shift to the stock exchange and away from where one would normally expect them to go: to the community of scholars, in terms of the research that is being undertaken; and to the community at large, in terms of the public interest research that is undertaken.

Our further concerns go to ensuring that the financial management of commercial ventures undertaken by ANSTO and AIMS are soundly based, well informed and open to public scrutiny. I have no doubt that, as a direct consequence of increasing commercialisation, we will see an increase in government claims that we cannot have access to information from these agencies because it is commercial-in-confidence.

We also want to make sure that public assets are not put at risk through these changes. We want to ensure that the financial accountability, probity and reporting requirements of commercial ventures and associated companies of the agencies maintain a rigorous standard which is comparable to those applying to the parent agencies. We have seen too many examples of lax standards. ICAC recently brought down a report on universities in New South Wales. The issue of corruption is becoming all too pronounced within the education system as a direct result of people seeking to secure funding external to government sources and cutting corners in the process. The opposition also want to make sure that the core missions and public resources of the agencies are not compromised or undermined by their commercial activities.

While the government will seek the passage of this bill today, it is important to highlight some of these concerns. I will want to hear, in the committee stage, what action the government is taking to ensure protections on these matters. I move:

At the end of the motion, add:

“But the Senate:

(a) condemns the Government for its failure to develop and set in place a coherent, national, all-of-government approach to research and development policy, and in particular a national strategy for commercialisation, including a nationally consistent Intellectual Property and public research management policy;

(b) calls upon the Government to ensure that:

(i) commercial arrangements set in place for ANSTO and AIMS recognise that policy responsibility for publicly-funded research, and for funding public-good research, remains with the Commonwealth and that commercially generated funds should supplement, rather than replace, public funding;

(ii) safeguards are put in place to ensure that the financial management of commercial ventures undertaken by ANSTO and AIMS is soundly based, well informed and open to public scrutiny;

(iii) public assets are not put at risk in the agencies' commercial ventures;

(iv) financial accountability, probity and reporting requirements with regard to commercial ventures and associated companies of the two agencies are of a rigorous standard, comparable as far as possible to those applying to the parent agencies themselves; and

(v) the core missions and public resources of the agencies are not compromised or undermined by their commercial activities”.