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Today at the National Press

Innovation, Science, Industry Club - the Minister for

and Research, Senator Kim Carr.

Today he will concentrate on

the first of those portfolio

responsibilities, discussing

the critical role of the critical role of innovation in battling the global

financial crisis. Senator Kim

Club address. Carr, today's National Press

Ladies and gentlemen, welcome to the National Press

Club and today's National

pleasure Australia Bank address. It's a

pleasure and a very timely

occasion to welcome back Kim

Carr. He's in these rather

volatile global economic

circumstances, his portfolio

covers most of the the areas

through which we protect or extricate ourselves and that

will be the general theme of

his address to you today.

Please welcome the minister,

Kim Carr. (APPLAUSE)

Thank you very much for the

welcome and as part of the

events surrounding Science

Meets Parliament, e've decided

to call today's address 'The

Science of re - recovery -

research, innovation and the

global Crisis'. When I spoke to

James Cook's you last year I touched on

James Cook's first great voyage

in the 'Endeavour'. As we

celebrate the 200th anniversary

of Charles Darwin's birth, it

may be appropriate to begin by

mentioning another know men tus

journey of discovery, the one

Darwin embarked upon a the Beagle' at just Beagle' at just 22. Historian

Richard Holmes suggests that

the period that's bracketed by

niece two departures, Cook's in

1768 and Darwin's in 1831,

produced a new kind of science,

infused with the romantic

sensibilities of the times. He

calls it the age of wonder. Holmes argues that we should Holmes argues that we should

thank this age for two enduring

stereotypes. The first

idealises the scientist as a

solitary genius, "thirsting and

reckless for knowledge for its

own sake, and programs at any

cost". The second idealises the

Eureka moment. That

Eureka moment. That "the

intuitive, inspired instance of

invention or discovery for

which no amount of preparation

or preliminary analysis can

really prepare". To measure

just how remote these concepts

are from the real world of

science, we need to look no

further than the example of

Darwin himself. Far Darwin himself. Far from

working in solitude, he was

almost a compulsive

collaborator. So itchy was he

for correspondence that he

placed a mirror by his study

window to forewarn him of the

postman's approach. Over 14,000

letters were written or

received by Darwin and they

survive in collections around

the world.

the world. He wrote not just to

other scientists, but to "the

breeders, the gardeners, the

zoo keepers, the highland

Gillies, the pigeon fanciers of

Victoria Britain", from whom he

drew so much his practical

knowledge. And as far as the Eureka moment is concerned -

well, it's very, very hard to

discern one. After returning to England in

England in 1836, Darwin devoted

six years to research, to

reflection, to consultations

with his colleagues, and the

increment al problem-solving

before he first roughed out the

theory of natural selection in

1842. So to my mind, Darwin's

experience gives us a much truer sense of

truer sense of how science or

how politics or any of the

great creative activities is

actually undertaken. It's

nearly all hard graft. And it's

nearly always a collective

effort. This is what makes new

discoveries and it builds new

worlds. This, more than

anything else, is what it will anything else, is what it will

take to mobilise science

against the global recession

and enlist it in the service of

recovery. Now, this is not a

cause to be taken up lightly,

but at least we start from a

solid foundation. Since we last

met, the government has made

significant new investments in

science and research. Some in

fulfilment of election promises, and some in response

to the crisis. Starting at

school and working along the

research career path, we can

say that we've provided $1

billion in nation-building and

jobs plans to build some 500

high school science labs or

language r learning centres. We've provided funding for 4,500 extra Commonwealth

scholarships for undergraduates

in 2009. That's our

down-payment on a pledge to

double the number of

scholarships by 2012. We've

introduced the HECS remissions

and refunds to get more young people studying maths and

science at university, and so

to pursue maths and science

careers when they graduate. But

we've also set out to double

the number of Australian

post-graduate awards, beginning

with 1,000 extra awards this

year. We've created 1,000 new future fellowships for

mid-career researchers. And

we've introduced the Australian

laureate fellowships for senior

researchers. We've spent $1.58

billion on university capital

works in the last year. A

billion from new money, and the

remainder fast tracked from the

education investment fund.

We've also made substantial progress in the implementation

of the excellence in research

for Australia. We've written

new guidelines to refocus and

revitalise the cooperative

research centre's program and

we've established a series of

industry, innovation councils involving

industry, government and

researchers. We've negotiated

charters guaranteeing the

independence of our public

research agencies. And we've established the enterprise

connect network, which will

give small and medium-size

firms a gateway to the national

innovation system. Now, that's

not a bad start. And I'd be reasonably content with it

right now, if it weren't for

the other new development, that

is, since we gathered last,

namely the global economic

crisis. This has cast

everything - I mean everything

- in a new light, including our

agenda for innovation, for

science and research. The

Europeans have declared 2009

their year of creativity and

innovation, and they did so their year of creativity and

long before the crisis erupted.

But it has turned out to be an

apt coincidence. There is a

growing consensus that

innovation is the key to

recovery. The OECD has noteed

that while innovation policy is

usually about creating

conditions to support long-term

growth, it can also be growth, it can also be about

having immediate effects. For example, by removing barriers

to investment and unlocking

demand. The organisation also

suggests that countries with a

strong innovation policy are

likely to come out of this

crisis in much better shape than countries with no clear

commitment to invention, to

discovery, and to continuous

improvement. Now, there's a hill in

hill in the middle of the Bongbong racecourse, not far

from Bowral. The order of the

field - of course, when it

disappears behind a hill - is a

surprisingly raw predicator of

the order when it emerges at

the other side. The message

from the EOCD is that for the

unprepared, this recession

could be a lot like that hill. That's why we are That's why we are seeing

governments around the world

choosing to stimulate their

economies by investing in

research and entrepreneurship

in ICT networks and similar

knowledge infrastructure, in

human capital, in green

technologies. The $4 trillion

yuan stimulus package announced

by China last November

significantly increased support for

for innovation and high-tech

industry. The sheer scale of

that package, like the scale of

China's lending to the United

States, reminds us just how

powerful an engine the Chinese

economy is. Now, this is not a

country dedicated to producing

$2 shop tat. This is the

world's biggest exporter of world's biggest exporter of

high technology goods. Whether

it be in aerospace equipment,

computers, electronics,

telecommunications equipment,

or in farm sat --

pharmaceutical s. It's bigger

than the US, than Japan and the

combined European Union. It's

likely to be one of the

countries that comes out of

this slump further ahead in the

race to the top than it was when the

when the crisis began.

President Obama is working hard

to ensure the United States

doesn't lose ground. His

America recovery and

reinvestment Act provides some

$25.5 billion US for scientific

research. Half of it in health.

And another 15.8 US billion for

undergraduate financial

assistance. The assistance. The national Science Foundation received

some $3 billion US in the

recovery package. And the

President is proposing to lift

the foundation's day-to-day

funding by a further $950

million US in his first budget.

Now, this is a substantial

early return on his election

promise to double the federal

funding on basic science over the next

the next 10 years. Meanwhile,

the United Kingdom has brought

down a ?3 billion worth of

capital expenditure and has

brought it forward from 2010-11

to this year and to the next.

And much of this will go on

schools and on vocational

training facilities and on

actions to increase the energy

efficiency of social housing.

Quite clearly, there are

obvious parallels with their

obvious parallels with their priorities, but these countries

and ours, although in terms of

the United Kingdom, the ?269

billion worth of university

infrastructure pales decide the

$1 billion in brand new

building money that the

Australian universities

received last year. The

European Union has called on European Union has called on

all member states to stimulate

growth and productivity by increasing their investment in

research, innovation and

communication. The EU points

out that the tendency to

postpone R & D investments in

previous downturns he destroyed

knowledge and capital , with

very negative effects on Europe's growth and its

employment prospects in the

medium to longer

medium to longer term. Many of

the European competitive

ministers two weeks ago resolved to make investments in

research and innovation a high

priority and to reaffirm

Europe's goal of lifting R & D

expenditure to 3% of GDP. The

EU is fast tracking state aid

approvals an over the past six

months it's signed off on

innovation and R & D support for pharmaceuticals

for pharmaceuticals in Belgium and advanced materials in

Germany, for aerospace in

Sweden, and ICT in Spain; for

soft sector al R & D in Malta

and user driven innovation in

Denmark. For young inventors

and small business innovator,

innovators in disadvantaged regions. Now, this list of

course is far from course is far from exhaustive.

The aid is going to private

firms and public researchers in

the form of grants, soft loans,

tax concessions, risk capital, and repayable advances.

Australia's most significant

foray in this field has been

the Green Innovation Fund. We

promised the fund at the last

election but we've since

increased its value from the

500 million we promised to 1.3

bm and brought forward the

starting date from 2011 to

2009. The fund will offer

grants to support research,

development and commercialisation of Australian

vehicle technologies that

reduce fuel consumption and greenhouse gas emissions. For

those of you who don't read the

motoring pages, the fund is

open to researchers as well as

to car and component to car and component manufacturers. The Australian

Government shares the view that

- with other progressive

counterparts around the world,

that one of the best ways to

rekindle growth and support

jobs is by investing in

innovation. As well as putting

money into university

infrastructure and automotive R

& D, we've also provided $14.7

billion to build and upgrade billion to build and upgrade

school facilities. We've

provided cash bonuses for

students, including tertiary

students receiving income

support. 3.8 billion dollars in

business tax breaks for

companies that are able to ease

the cost of acquiring new

technologies. Now, the beauty

of these technologies and these

investments is that as well as

giving the economy a boost

right now, they also build a

platform for future growth by

expanding our capacity to

generate knowledge and ideas.

However pressing the needs of

the moment may be, we must

never lose sight of the

opportunities tomorrow will

bring, and that's why the

Australian Government has

articulated 10 ambitions for

innovation, science and

research. The first of these

ambitions is to progressively

address the gap in funding for

indirect costs of university

research, subject to the

capacity of future budgets.

Now, I've had some flattering

press on this issue. It's pretty unusual but I have had

some flattering press on this

issue since I announced it 10

days ago. And some have greeted

it as the most important

university reform in a

generation. As much as I like

being told I'm greater than Humbolt and I've begun to

insist on that around the

office, it may be time for a

reality check. Even in my rare

moments of diffidence I can

recognise that I haven't Sur

passed the brilliant prussian

thinker who pretty much invented the modern university

- well, at least not yet. The - well, at least not yet. The

government has made a real

commitment and a very important

commitment to research funding,

but it is not unconditional.

For a start, it will depend on

fiscal circumstances. There are

many other claims on the

budget, indeed, there are many

other claims on the research

and innovation component of the

budget. While we're weighing

these claims with a view to producing the very producing the very best

possible growth and employment

outcomes, even when the crisis

is orfs the government willing

holding real growth to spending

to some 2% until the budget

returns to a surplus. Expecting

the funding gap to be addressed

in small steps therefore, not

in giant leaps. And I think we

can expect it to be just only if and

if and when universities keep

their side of the bargain. The

second of the government's

ambition is that we return for

action on research funding.

Universities will be able to

provide better and more

meaningful data on research

costs through activity-based

reporting, and meet specific

performance targets which will

develop in consultation with

the sector. Now, response to

this one, I might point out is

somewhat less enthusiastic. Some in fact have suggested

that maybe I'm only perhaps no

greater than Dawkins. Now,

look, frankly, this is a

relegation that I think we can

be prepared to live with,

because the two ambitions are

quite inseparable. I'm

absolutely without shame on absolutely without shame on

this. The promise of increasing

funding will be used to induce

changes in people's behaviour.

The government doesn't want to

micromanage universities, and

I've said this again and again.

The whole point of our

mission-based funding compacts

is to increase institutional

autonomy. But what we do do, we

do want to see, is universities that that are more transparent and

that are more accountable. We

want resources allocated

rationally, and used

efficiently. We want the best

possible return on the

community's investment in

university research.

Activity-based costings and

performance targets will help

achieve those objectives. They

are critical to promoting excellence and excellence and making

Australian universities more

internationally competitive.

Which brings me to my next two ambitions. Over the next

decade, we want to progressively increase the

number of research groups

performing at world-class

levels. As measured by

international benchmarks. To

that end, we'll use funding

mechanisms and compacts to encourage hubs

encourage hubs and spokes

arrangements that support

collaboration between

universities and build on

research strengths. Now, this

is the point at which I might

say people start muttering that

perhaps I'm no greater than

Nelson, and I didn't mind that

until I heard they actually

meant Brendan. (LAUGHTER) To

this end, I can only say that this end, I can only say that -

we've been saying this since

Labor proposed this model of

hubs and spokes back in 2006.

It's not about creating a

hierarchy of institution; it's

about creating cooperative

networks of teams and of

individuals. It isn't about

bending necks to the

bending necks to the yoke. It's

about joining kindred spirits

in a willing embrace. It isn't

about putting anyone down. It's

about raising everyone up.

Raising everyone up to the

highest standards of research

excellence by enabling them to

work in first-class conditions

and, of course, in first-class and, of course, in first-class

company. Now, Australia isn't

China. We're not the United

States. We simply can't match

the billions that they have

devoted to research, not now,

not ever. That does not mean

that we give up on the idea of

producing knowledge that is new

and valuable to the world. It doesn't mean that we hover at doesn't mean that we hover at

the margins of the feast. Grateful for whatever crumbs

might fall to us. We can, and

we must, claim our seat at the

table. We can and we must be

fully enfranchised participants

in the global knowledge economy

and the global innovation system. Our system. Our prosperity, our

security, our sovereignty will

depend on it. The world of

ideas will increasingly be

dominated by a handful of great

powers. China, the United

States, Japan, India. Maybe

Russia. Certainly a seamless

European research area. The key

to making an impact in this environment is to think

strategically. If our forces

are small, we have to choose

the rein that actually favours

us. If our resources are

limited, we have to concentrate

them on where it counts. --

choose terrain. That's why I'm asking universities to figure

out what their mission is.

That's why why I'm asking them

to set priorities and to play to their to their strengths. That's why

I want to tie research funding

to research performance. I know

you will say that's a crazy

idea, but I know that that's

one that seems to have caught

on in just about every other

area of human activity. That's

why I want to renew and enlarge

the research work force. Now, we haven't got we haven't got a lot of money

to spend on research and

certainly not as much as I

suspect anyone here, including

myself, would like. But one

thing we have is an abundance

of talented people. The good

news is that this is the single

most important prerequisite for

successful innovation. The bad

news is that we are letting far too much of our too much of our talent go to

waste. The Commonwealth and its

partners have responded to this

problem by resolving to - again

I will go through this list.

We've committed to increase the

proportion of young people who

are completing Year 12 or the

equivalent of 90% of that

number. The proportion of young

people with bachelors degrees

or better to 40%. And or better to 40%. And the

proportion of people coming out

of low socioeconomic

backgrounds to 20%. The effect

of achieving these ambitions

will be to substantially

enlarge the pool of potential

research students over the next

10 or 15 years. This will make

a difference in the long term.

Now, we also know that we need

immediate action to renew our

ageing academic work force and ageing academic work force and to entice more of today's

bright students into research

careers. Dr Cutler, Professor

Bradley, the House of

Representatives inquiry into

research work force issues, the

national tertiary Education

Union, they all speak as one on

this issue. The government has

responded by outlining three policy ambitions. The first is

to develop a research work to develop a research work

force strategy to meet expected

shortfalls in the supply of research qualified university

staff in the period to 2020.

The second is to increase

support for Australian

postgraduate award holders as

budget circumstances permit.

And the third is to

significantly increase the

number of students completing

higher degrees by research over

the next decade. Our aim isn't

just to

just to replace the large

cohort of academics coming up

for retirement; it is to

actually lift the proportion of

PhDs in the general work force.

The next of our 10 ambitions

for research innovation is to

double the level of collaboration between

Australian businesses,

universities and publicly

funded research agencies over

the next decade. This will

require cultural change on both the

the research side and on the

industry side. This is not

about subordinating science and

research to utalitarian

imperatives. It doesn't mean

that we want less basic research or less

curiosity-driven research or

less research directed towards

answering the big theoretical

questions. This is the kind of

research that will always be

fundamental to the fundamental to the scientific

enterprise. But the bulk of

will continue to be performed

through the universities. We

currently rely on universities

to do some four-fifths of our pure basic research and

two-fiths of our strategic

basic research, but still, that

only represents about half of

their output. The other half is

applied research and

experimental development. Now,

this is the work which is most likely to

likely to be of practical

interest to industry. It's the

kind of science that we can

make us more productive and

more competitive. It's the kind

of science that can drive the

development of new technologies

and new industries, and it's

the kind of science we would

like to see innovative firms

gaining better access to and

making better use of by forging

partnerships with public sector researchers. This will researchers. This will take us

a long way to achieving our

penultimate ambition, which is

to see a 25% increase in the proportion of businesses

engaged in innovation over the

next decade, and continuing to

increase the number of

businesses actually investing

in R & D. We will not realise

this ambition if we do not

allow ourselves the allow ourselves the knowledge

intensive start-up companies or

we allow them to be crushed by

the global economic crisis. The

supply of funds for early-stage

venture capital investment has

dried up since the crisis broke

last year. It is my pleasure to

announce today that the

Australian Government will

redress this market failure by

establishing a new innovation

investment follow-up fund. The fund will fund will make additional money

available to more than 20

venture capital fund managers

licensed by Commonwealth under

existing programs. The fund

managers will use this money to

invest in innovative firms,

promising new technologies and

services to market. The venture

capital sector has made it

clear in their consultations

with the government that

without this kind of support,

without this kind of support,

good prospects will fail and

fund managers will have no

capacity to invest in new

companies with great ideas and

technologies. These firms aring

being starved of critical

capital through no fault of

their own. If we lose them, we

may never get them back. By

supporting them, we'll be

supporting at least 1,000 science-based science-based jobs. The

government will finance the

innovation investment follow-on

fund by reinvesting money that

was returned to the innovation

investment fund. About $83

million will be put back to

work in this new fund, making

this money available to

reinvest will boost confidence

and will help shake loose

additional private sector additional private sector capital. The review of the

national innovation system

stressed how important a

functioning venture capital

market is to the innovation

process. The government will be providing a full response to

the review as part of the

budget processes, but we are

announcing this element now

because the situation is so

urgent. It is essential that we

help these fledgling companies

to ride out this

to ride out this crisis. They

are doing great ground-breaking

work in fields like

biotechnology, in ICT and clean

energy. Any one of them could

be a new ResMed or the next

Cochlear or the Next G ekko Systems. They are precisely the

kinds of companies we want to

have around when the recovery

comes and we are of course

looking to new pathways to

their prosperity. Our final their prosperity. Our final ambition is to increase

collaboration in research by

Australian universities.

Australia, I might say, is

already pretty good at this.

Four out of five of our highly

cited Australian researchers

have research experience

outside of their own country.

We're second only to

Switzerland on this measure .

And we are of course much more cosmopolitan than the United

States where the figure is less

than one in five.

than one in five. In the five

years to 2000, 31% of

Australian research papers had

an international co-author. And

in the five years to 2005, it

was 40%. This puts us in the

same league as the UK, France,

Germany, Canada, and well ahead

of the United States and Japan.

Our performance is good. But I

always come back to the same always come back to the same

question: is it good enough?

The proportion of Chinese

research papers with

international co-authors is

relatively low. But when it

comes to the absolute volume of

collaboration, they overtook us

some time ago. In the five

years to 2000, we were involved

in 4,900 more multinational papers than

papers than China. In the five

years to 2005, China was

involved in 8,000 more

multinational papers than us.

And the gap will continue to

grow. Australia has everything

to gain from participating in

more international networks and

partnerships, and a world to

lose if we allow these

Lunchtime News to die. That's why the government has opened up

up the Australian Research Council fellowships and awards

to overseas applicants and let

no-one accuse me of opposing

free trade! We want the world's

best scholars working in

Australia addressing Australian

questions and of course

monitoring young Australian

researchers. And we want of

course those scholars to be or

where these scholars might well

be natives of this country, but be natives of this country, but

others won't. So we remove the

restrictions on the use of ARC

funding for travel by

international collaborators,

extended the international

science linkage program and

stepped up Australia's

involvement in the

international efforts to build

the square kilometre array

radio telescope. I'm always

looking for new ways to

maximise maximise our research in

international projects. It's

one of the kind of

collaborations I would like to

see more of and that's the collaboration between the

natural and the human sciences.

The age of wonder, that

interval between the voyage of

the 'Endeavour' and the voyage

of the 'Beagle' owes much of

its appeal to the fact that

apparently self-evident

division was still invisible to most intellectuals . most intellectuals . This was

in the age when John Constable

could call a painting 'A branch

of natural philosophy', of

which pictures are but

experiments. In the age when

Humphrey Davey could explain

that he did science because he

loved narrative, a passion

inspired by his Cornish

grandmother's legends and ghost stories. He

stories. He was a man for which

each discovery was a tale

waiting to be told. He gave me

particular pleasure to create a

stream for the humanities, arts

and social sciences in the international science linkage

program last year and to leave

the name of the program just as

it was. It was a joy to

reinstate the older and more

inclusive sense of the word

"science" which "science" which once referred

to knowledge in all its forms.

Perhaps this is the definition

we should be using when we talk

about rallying science to the

cause of recovery. It will be a

long campaign. And we'll need

all the reinforcements we can

get. Thank you very

much. (APPLAUSE)

Thank you very much,

minister. We begin our period

of media questions with the

first from Louise

Dodson. Minister, I note that

much of your speech was taken

up with the importance of

innovation in Australia's

recovery from the global

financial crisis. And I'm just financial crisis. And I'm just wondering, one particular area

which is the commercialisation

of business R & D, people in

the business sector are saying

that the suspension of the commercial-ready grants scheme

has been particularly

disruptive because it provides

upfront money instead of R & D,

which provides money after the

fact. Can you comment on that, please?

please? Yes, there has been

considerable conversations

about the issue of cessation of

that particular program. Of

course, what needs to be

pointed out, that program was

replaced by a number of other

programs, including retooling

for climate change, the green

building fund, and a

climate-ready program. There

are issues that were canvassed

in the Cutler Review in regard

in the Cutler Review in regard

to the capacity of the

Commonwealth to work with firms

to actually develop the commercialisation of new

technologies. These are matters

that are apparently before the

government in terms of our

response to Cutler, and we are

looking at those issues. The

other mother that is I think

important and needs to be seen

in the general suite of

measures that are available,

because there's no one magic

bullet here, there is the whole question

question of the R & D tax

concession and these are issues

that are equally being canvassed. And there were some

options presented in the Cutler

Review on that matter as well.

We've seen recently the

tragedy of mass job losses at

Pacific Brands and I was

wondering whether you have any sympathy to sympathy to the need to bring

forward funding for the

textile, clothing and footwear

industry. Well, Roy Green gave

us a very good report, the

review that was undertaken by

Roy and his colleagues I think

provided a very good framework for future discussions with the

industry. His recommendations

went to questions that were for

implementation in the period in

2010. We their the process of 2010. We their the process of

evaluate ing those reviews and

we are obviously discussing

with industry measures that can

be taken in the intermediate

period. The existing program

does allow for advances on

program moneys to be paid, and

has been in place for some

little while. We are looking at

industry - working with

industry on how that might be

used. We're also considering a

whole range of other whole range of other measures

in regard to TCF industries.

I'm of the view that TCF has a

strong future in the country.

6,000 firms still operating. Pacific Brands' position does not reflect that of the

industry at large and decisions

were taken by the board of

Pacific Brands which led to inevitable consequences

following and I think their

decision has to be seen in that

context rather than a comment on the future of

on the future of the industry

itself. Good afternoon, minister. Now, I hate to say

it, I have another Pacific

Brands-type question here for

you. Under the Howard Government's strategic

investment program scheme,

textile, clothing and footwear

manufacturers were given subsidies and they would only

have to hand them back to the have to hand them back to the

government in the event they moved factory equipment

overseas or moved the plant

equipment. In your heart of

hearts, do you believe the laws

need to be changed so that

firms who sack workers will

also have to hand back the

money to the government? Well,

this is not the forum for me to

be canvassing my heart of

hearts, I can assure

you. (LAUGHTER) So I don't want to disappoint want to disappoint you, but

... (LAUGHTER)

The fact remains that Pacific Brands' decision was

one which deeply regretted. And

the actions that were taken by

Pacific Brands that we thought in northernal circumstances if

they'd spoken to us earlier may

not have had to be made. The

truth of the matter is that

Pacific Brands represented some 3% of

3% of the industry. There is a

company a consortium that had

been built over many years and

they've enjoyed from the public

purse in various forms since

1895. Some 30 entities make up

that consortium. And I was deeply disturbed by their

decisions. The fact remains

that it's still that it's still employing, even

after these regrettable

decisions are actually

implemented, some 4,500 people.

So our - my comments about

Pacific Brands need to be

measured and tempered in the

context of their ongoing employment opportunities that

exist in the firm. We are

working with a number of

purchasers or potential

purchasers about the sale of

existing plants, existing plants, entire plants.

So I'm anxious to try to see

what we can do to salvage as

many jobs from the wreckage as

possible. The general question,

though, of refund of moneys for

equipment that's sold needs to

be handled very carefully. Some

of the moneys paid for

activities which were quite

intangible. How do intangible. How do you recover

money, against what assets,

where there is no physical

asset? And at what point do you

recover the mufr ee? At what

depreciation rates and under

what circumstances? It's easy

to say yes we'll take the money

back but it has to be measured

against the harsh reality of

general business life. I'm

generally of the view that all

funded should be based on

mutual obligations. That's the

approach we've taken. These are

programs set by the previous

government. The programs I'm

establishing are all predicated

on the presumption of mutual

obligation. I simply can't

change the law in time to

change the funding arrangements for Pacific Brands. And

frankly, it would be improper

for me to go outside the law in

terms of the administration of

government programs and I will

not be doing that. I think the

quote that you gave from the

European Union that we must

invest in research, innovation

and education is really the nub

of the issue. So using that as

a premise, could you please

explain how the hand-outs of

$1,000 to people whether they

be alive or dead or in

Australia or overseas, the two

batches of that, how that can

really focus on investment in research, innovation and education? Shouldn't it really

have been focused on other

things? And also, as a

follow-up on that, do you think

you will be able to get more

money from the national

competitive research grants

scheme in the budget because in

the last budget, the dollar

terms were still less than what the Howard Government gave in

2005. Well, let me try to deal

with your first question. That

is, what snait tour of the

funding arrangements --

what the nature of the funding

arrangements and the projects

that were announced in terms of

our stimulus packages in two

tranches now were in two parts:

programs designed for the immediate stimulation of the

economy, to support jobs in the

retail industry n a range of other industries, immediately.

The nature of our economic

difficulties is that if we had

not acted, the decline in

economic activity would be

much, much greater than it is

at the moment. We are keeping

this economy moving more

quickly and as a consequence

moving through this crisis more

quickly than we would if we'd

done nothing. And the payments

of cash to people is designed

for people to actually move and

lift the level of aggregate

demand quickly. And we make no

apology for that. The bulk of

the money, however, is going on

infrastructure. The

overwhelming bulk of the money.

That's about building long-term

capacity for the country which

I would strongly support. In

regard to the future budget arrangements, I'm not in a

position to reveal the budget

here today. I can say to you I

will be doing all I can to

actually enhance our prospects

in terms of our capacity to

build excellence in research in

this country.

this country. I know that the

one potentially revolutionary

innovation lies or could lie in

stem cell research, which has

recently been in the news since

President Obama lifted

embryonic stem cell research restrictions. How will

Australia keep up with what is

becoming and what is now a

global effort in stem cell

research? Well, we have a very

good research base through the

Australian Stem Cell

Organisation which of course is

the subject of recently - a

recent review. And the findings

of that review in terms of the

executive summary and its recommendations were matters

that I released at the Senate

Estimates a couple of weeks

ago. So there is clearly a

major question there about how

we go forward with that funding

arrangement. The universities

and other research agencies

equally have important roles to

play. I'm committed to pursue

excellence in research to our

stem cell - for our stem cell scientists and to build

scientists and to build international collaborations

around that. The actual operations of the existing

program are subjects the government's considering right

now. When Treasury did its modelling for what the

government calls the carbon

pollution reduction scheme, one

of its assumptions was that

manufacturing in Australia

would continue to shrink. I

think the official term was

"continue its historical

decline". You told the Senate

in November that you disagreed

request that assumption. Since then --

disagreed with that assumption.

Since then there has been a bit

of economic water under the

bridge and there's been quite a

few manufacturing jobs go with

that. I wonder if you still

disagree with Treasury's

assumption four months later,

and if you do, how is the

carbon pollution reduction scheme compromised by this

false assumption? And how is

our manufacturing sector

potentially compromised by the

scheme? Well, Simon, as you

and I've discussed on many occasions, there is no question

that there is a difference of

opinion about the importance of

manufacturing in Australia. I

remain unashamed in my

commitment to manufacturing,

and my support for manufacturing. I know it's not

clever in all quarters to

actually support blue-collar

workers, and I know there is a

view that we don't necessarily

have a seat at the table there.

I disagree. The level of

productivity in manufacturing

is just incredible. The level

of output, historically has

continued to grow. It's only

this year that we've seen a

drop-off in terms of the level

of output. That doesn't

normally happen. So what you're

seeing in manufacturing is a

decline as a proportion of GDP,

but a growth in terms of its

output. That's because of the

people who work in it produce a

lot more year after year after

year after year. That's because

the levels of investment are increasing up until recently year after year after year.

That's because their level of

exports have increased year

after year after year after

year. And as I say, I know that

amongst the economics club

there's a view that we're

better off making this someone

else's problem. I don't share

that view. I do not share the

view that Australia does not

have a role to play in the

future of world manufacturing.

We have to be careful about

what we do and where we do it,

under what terms we do it. We

can't compete with China in every aspect of manufacturing

or India or Bangladesh. But

there are many aspects of

manufacturing where we are

extremely well placed and will

continue to be extremely well

placed. The proposals under the climate - in terms of climate

change are measures we are

taking provide new

opportunities, not threats, new

opportunities. This is a chance

for growth. This is a chance

for us to get well ahead of our competitors. This is a chance

to use the people in this room

to actually generate new

economic activities, about

building those connections, and

that's why I say that

Australian manufacturing has a

bright future. You've talked

about the clear importance of

research in Australia's

recovery or the world's

recovery from the crisis. Why

has there been nothing then in

the stimulus packages about R &

D or about things like grants,

soft loans, tax concessions,

repayable advances. You say the

European Union has done that.

Why are none of those measures

or a one-off boost to the ARC

funding or something like funding or something like

that? I'm sorry, you're just

wrong. There's a $3.8 billion

measures to support investment.

Early investment. There's a

range of measures in regards to

productivity places and

retraining. The government is

committed to ensuring we lift the level of economic the level of economic activity

quickly, so our early programs

are aimed at that. We're not

done yet. And there will be

further measures. I'm looking

forward with some interest to

having a further conversation

with you about that. (LAUGHTER)

I wondered if you could talk a

little more about university

compacts. What kind of things

will they cover or will they cover or contain? For

example, could they bind

universities to institutional

equity targets? Well, clearly

compacts will be in two parts.

That is, relating to the

education program, the

undergraduate program and the

research program. I can speak

with greater authority on the research program. Minister

Gillard of course is

responsible for the undergraduate undergraduate program. It is

our expectations that these

compacts will actually enhance

institutional autonomy. That's

the first thing I want to

emphasise you to. They'll

actually strengthen the relationships between

institutions to actually

encourage collaboration and they'll provide an opportunity for universities to actually

talk to us about what their

strategic missions are. We will strategic missions are. We will

expect, in return, commitments

to a broad policy framework

gnat government's pursuing and

I've outlined today those 10

broad areas that we are looking

at. They will of course involve

funding arrangements. They are

designed to actually move

forward reform. Structural

reform. To build international competitiveness and to

encourage the cultural change that we

that we say is necessary to see

a fundamental transformation of

our university system in this

country. If the universities

are to meet what I believe to

be their proper place, their

real promise in terms of the national innovation system,

then we do need a substantive

program of reform and I think

there's wide support for it.

And that's what we'll be doing

through those compacts. It's the vehicle by which the vehicle by which we have

those discussions. I will try

two questions if I may. The first is that Kevin Rudd

yesterday told the Labor caucus

that the budget would be tough.

It had to be fiscally responsible. That was your article in the paper this

morning. Yes and I was told one interpretation would be for

ministers to put their shopping

lists away. Yes. Now, my

question is: how tough is it for

for you so far? Have you put

your list away? I read your

article with some interest this

morning. And I must say, it was

news to me . (LAUGHTER) I think

that you can draw the old story

about give you a button and you

will make a waistcoat. I think

that's what you've done. We

have a situation where the

government is now looking very,

very carefully at every line

item. We item. We are assessing really

carefully what our options are.

And we have to be certain that

the best choices are made - and

that's a perfectly legitimate,

proper process. And I remain

confident that we'll get a fair

hearing. My second question is

on a line item. You've talked about venture capital today.

There were various forms of

venture capital. You're putting more money into the early stage more money into the early stage

butter predecessor as minister

changed tax arrangements with

private equity and venture

capital in total. The big end

of town in terms of private

equity. Do you think there is

any need to sort of reconsider some of the tax concessions

that it's got in the past?

Well, these are matters that

Ken Henry is now looking at,

this whole issue about what

measures we can take in regard

to reform of the taxation system. In terms system. In terms of our work, we are obviously considering

those matters as a whole-of-government approach.

We wait and see where that

takes us. I can't provide you

any more advice at this stage.

Following up on my colleague's

previous questions, to Louise

on the Comretti program, you

said we're looking at things in response to the Cutler but there are companies now who there are companies now who are

wondering if they can keep

going on. There are

pharmaceutical companies that

are thinking about taking their

research offshore. Are you

saying to them genuinely: wait

and see, in budget there will be something for you? Or are

you saying to them: look, it's

tough times, and I'm sorry, but

there's just not the resources

there to - I know in opposition, you were so opposition, you were so strong

on, as everyone here in this

room would know, you were so

passionate about these topics

and we've all heard your views

on that in opposition. I know it must be tough now that you're in government to find

that the purse is empty. I'd

like to hear your views as

someone who's passionate about

science, just how hard is that

personally? Is a galling?

Well, it is no doubt - you're

quite correct and I haven't

changed my passion or

commitment. The fact is, the

commitment. The fact is, the world's changed. Since Cutler

was brought down, we are

looking at a fundamentally

different set of circumstances.

And I think it'd be foolhardy

to try to avoid that simple

fact of life. We are in a

period of unprecedented economic turmoil

internationally. It's possibly

the worst economic downturn

we've seen in

we've seen in three generations. Some may argue

it's actually worse, because in

the period in the 30s, which remember it just didn't happen

in 1929 for a couple of years,

it actually went right through

till '39, that was a period when there was greater concentration on the effects of

the downturn in the developed

world, what we knew at the time

as the developed world, but

this is a global crisis. You've

got the IMF just last got the IMF just last week

talking about 120-odd countries

at risk of default. This

highlights just what a sharp

contrast we have in terms of

what the economic conditions

were like in August and what

they are now. Having said that I remain absolutely committed

to doing all that we can to

assist start-up companies, to

assist established companies,

transform industries, transform industries, and where

we find the company's in

difficulty, we'd like to talk to them. We say there are a

range of opportunities here

within the government. We want

to look at how they fit. There

will be times when we can do

nothing. We have to acknowledge

that. But we want to talk to

people. We want to talk to them

in the good times and the bad

times and we want to talk to

them about what measures we can

take to actually materially

make a difference, and that's

what we do. And

what we do. And we'll continue

to do. Just quickly in relation to your response to

David Crowe, buttons and

waistcoats, I know you are

wearing a waistcoat today. Australian-made

waistcoat, what's more. Very

good! I wanted to ask you about

these specific performance

targets that you alluded to and

whether there's not a danger in

might encourage universities to

go down safer paths if you like in

in terms of being able to say,

look, this is what we've

achieved, and I mean, would we

have it - if Charles Darwin had

said after all these years on

the 'Beagle', if they had to

meet these targets, would have this have actually

happened? (LAUGHTER) Well, we

are committed to discovery, we

are committed to ensure basic research is pursued research is pursued as a

primary function of

universities. But we're also committed to ensure that we get

value for money. This is not

about blank cheques, it's not

about saying to people, no

worries, whatever you like.

I've go to engage in the

dialogue with my colleagueses

and with the community. And I

want to be able to say to the

community that not only are we

providing more assistance, but

we're getting better value for

it and we are actually a it and we are actually a better

country of it, we're a fairer and more productive society as

a result of that. I think

that's an argument most people

want to hear. Let me ask you

the last question of the day.

With the vast amounts of money

that the government is directing towards the global

financial crisis as we all keep

calling it, the underlying

factor in just about every aspect of it

aspect of it is urgency to get

results. How much has that

affected your approach to your

portfolio? You have a lot of

money to give away to various

people. Has it affected it

materially? And to what

extent? Yes, it has. The whole

environment has changed. We now have to examine each and every

program to see what we can do

to adapt it to the current

circumstances. And many of the

programs were designed in different different times. And so we do

now have to think about reform

of existing programs and how

they might work. We're also

thinking about how we can

actually develop new

initiatives. And new ways of

working. Enterprise Connect,

which is a new system there to

actually move out and to talk directly to companies about

their difficulties. We have the

Innovation Councils. We're

using the

using the region al offices of

AusIndustry in a different way

than they've been used in the

past. We're asking the

Australian public service to

respond in different ways now.

This is a time when the

expectations were probably

never higher and I think our

public servants are up to the

task. I know they're responding

incredibly well to the requests

that I've made of them and I

know that they're working night

and day to work with the

government to find solutions to actually keep actually keep people in work

and to move through this

economic crisis as quickly as possible. Thank you very

much. (APPLAUSE)

Thank you very much,

minister. I think this is the

third time you've been here in

the last 18 months or so. You're already a member and

we've given you most of we've given you most of the

merchandise things we Brent to

other people. Just to keep the

creative juices flowing, we have something different today.

Thank you very much. Thank you

very much indeed. (APPLAUSE)

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