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Economics Legislation Committee
31/05/2018
Estimates
JOBS AND INNOVATION PORTFOLIO
Office of Innovation and Science Australia

Office of Innovation and Science Australia

[17:31]

CHAIR: Good evening, Dr Day. Thank you very much for joining us this evening.

Dr Day : Thank you for having me.

CHAIR: We're going to kick off questions with Senator Carr.

Senator KIM CARR: Thank you, Dr Day. I'm interested to pursue the position that the board took in the statement of 22 May, where you said the board believes that additional direct incentives to support R&D will be required to ensure Australia becomes a top tier innovation nation by 2030. Do you stand by that?

Dr Day : Yes. It was released very recently.

Senator KIM CARR: Are you disappointed that so many of your measures in the 2030 report—your plan—were not taken up?

Dr Day : Earlier in our release we pointed out that 27 of the 30 recommendations were supported—17 were supported and 10 were supported in principle—and three were noted. Our chair, Bill Ferris, is quoted as saying that the ones that were announced as part of the response were bold and significant measures by the government. I think that puts our position pretty clearly.

Senator KIM CARR: The measures with regard to collaboration—what do you say about the failure to accept that proposition?

Dr Day : I note that the government's response to our report noted those recommendations, did not reject those recommendations. I'm still relatively new in government, but to me 'noted' means there's room for further conversation. I would expect that the board will continue to maintain a dialogue with the government on those. We continue, as a board, to believe that collaboration between business and universities should be a high priority. But we note there are a lot of changes already working their way through the system.

Senator KIM CARR: Is it your view that further conversations need to be held this year?

Dr Day : The report is a 2030 strategic plan. It wasn't intended to be a plan for the 2018 budget cycle; it was intended to be a long-term strategy. I think the board has the view that we need to take a long-term perspective. So, whilst I certainly think that we will continue to have those conversations over the course of this year, I think the board does take a long-term perspective on the plan.

Senator KIM CARR: You also suggested that you wanted a commitment to ensure that funding for research, science and innovation did not fall below its medium-term average of 0.63 per cent of GDP. Are you disappointed that that position has not been maintained?

Dr Day : Again, that number is a reflection of the reported government investment in supporting science, research and innovation, in so-called SRI tables. They will be updated in due course. We'll keep an eye on it. I think we made it very clear in our report that we thought that that should be a priority. We'll see how that plays out.

Senator KIM CARR: Do you believe the measures taken here will see a fall in the medium-term average of 0.63 per cent?

Dr Day : It's fair to say that we look at the complexity and the number of moving parts in the innovation system with a degree of humility, and so don't try to make too many forecasts about these kinds of things. We will see how those results play out. I think we've said in the plan that turning around the current decline in business investment in R&D should be a priority. We'll continue to watch that and make that case to government.

Senator KIM CARR: I read a report, for instance, by Innovation Australia that said:

… chairman Bill Ferris did not hide his disappointment at the rejection of these core policy recommendations—

that's of the board—

even in his prepared media statement.

Do you think that's a fair reporting?

Dr Day : As I said, the words that are in the statement that Mr Ferris describes—the measures are announced as bold and significant measures. You would have to ask the journalist as to how he reached that conclusion.

Senator KIM CARR: I see. You don't think there's anything else in the media statement that indicates that the original report, which showed that Australia was slipping in terms of its performance, has been addressed in this budget?

Dr Day : Again, I refer to the release, which said, in the second last paragraph:

This reversal is core to our 2030 Plan and should remain a top priority for both business and government.

We'll continue to make that case to government in the months and years ahead.

Senator KIM CARR: So, when you say:

"ISA's advice to government continues to be that these changes should be accompanied by expansion of non-tax-based incentives of the kind used by many of our competitor nations. This is necessary to ensure that the current negative trajectory in business expenditure on research and development (BERD) can be reversed." Mr Ferris said.

What does he mean by that?

Dr Day : I think it's pretty clear what he means.

Senator KIM CARR: Self-evident, you think?

Dr Day : I think so.

Senator KIM CARR: It shows disappointment.

Senator Cash: Senator Carr, that's your opinion. Certainly, Dr Day—

Senator KIM CARR: This journalist has—

Senator Cash: Well, that is a journalist! They have all sorts of opinions. I think Dr Day has given very clear evidence.

Senator KIM CARR: You see:

… the Board believes additional direct incentives to support BERD will be required to ensure that Australia becomes a top tier innovation nation by 2030.

Senator Cash: Yes, by 2030.

Senator KIM CARR: That remains the position of the board, doesn't it?

Dr Day : It does remain the position of the board. Again, I note that the government noted our recommendation and did not reject it. We'll continue to make the case over the fullness of time.

Senator KIM CARR: I put it to you that, in government terms, 'noting' means they're not taking any further action.

Senator Cash: Senator Carr, that's your opinion. I think the government's explanation in relation to recommendation 19 is very, very clear. It is articulated in the actual response.

Senator KIM CARR: Your proposition that there should be a broadening in the suite of measures—it is your expectation that that case should continue to be pressed by the board?

Dr Day : Yes. As reflected there, the board still believe that more can be done and should be done, and we'll continue to make the case.

Senator KIM CARR: What particular measures do you think are required?

Dr Day : We haven't articulated specific measures here. We certainly, I would anticipate, as part of our ongoing advice to government, would develop some more specific propositions for their consideration, but in our previous statements we've indicated that direct support measures like the CRC program, like the Export Market Development Grants program and like the Industry Growth Centres program offer sensible channels for the government to further stimulate business investment in R&D.

Senator KIM CARR: In your view, how realistic is the example that Treasury have put forward in the budget papers of a company with an R&D intensity of 40 per cent?

Dr Day : My experience is that R&D intensities vary widely across sectors and across the globe. In many large research-intensive US firms in areas like software, pharmaceuticals and so forth you do see double digit R&D intensities, and in other firms you see lower levels.

Senator KIM CARR: So you did a bit of research for the board's paper?

Dr Day : Yes.

Senator KIM CARR: You were also involved with the 3F's review, weren't you?

Dr Day : No. The 3F's review was completed before I became CEO.

Senator KIM CARR: I see. You had no association with that?

Dr Day : No.

Senator KIM CARR: Did you see any of the underpinning papers for the 3F's review?

Dr Day : I've certainly seen some of the analysis that went into it, yes.

Senator KIM CARR: How many companies did you see as part of those reports that had an intensity measure of 40 per cent?

Dr Day : I can't recall seeing that specific data as part of the papers that I saw.

Senator KIM CARR: Thank you. There are many things I want to talk to you about tonight, but we don't have a lot of time. I'm wondering if you can help me with this: the budget papers confirm, on my reading of it—and I misquoted a figure before, which Ms Weston appropriately picked me up on—that the government's invested $542 million over the forward estimates, but it's taken $2.5 billion from the R&D tax incentive. That's one-fifth of the money that's been returned—

Dr Day : I think $2.4 billion is the—

Senator KIM CARR: $2.4 billion, you say? Well, I say $2.5 billion. I think you'll find it's a little more—

Dr Day : $2.44 billion between friends.

Senator KIM CARR: Let's not quibble about it, given the scale of these cuts. Do you consider that to be adequate?

Dr Day : As I said, our report clearly said that we felt that the government support over the medium term shouldn't drop below its overall average. When you're reading budget tables, it can be difficult to determine which measures directly drive R&D and which measures don't. Our preferred measure is in the science, research and innovation tables, the SRI tables, which are prepared and updated annually, and we'll watch those.

Senator KIM CARR: Thank you very much. Look, I have to leave it there. There are a lot of other things I need to do, but I haven't got the time.

CHAIR: Are there any further questions from senators for the Office of Innovation and Science Australia? As there are not, we will let you go, Dr Day. Thank you very much for joining us. I'm sorry that we rushed you through a little bit.

Dr Day : Thank you.