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Fears for Australian innovation -

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Fears for Australian innovation

Broadcast: 19/03/2009

Reporter: Rafael Epstein

As the credit crunch continues, Australian companies are finding it tougher and tougher to get the
money they need. For new companies trying to start-up, like a novel software design or a step
forward in biotechnology, the task has been made much harder by the cancellation of a $150 million
government program. A move that some say could kill innovation in this country.

Transcript

LEIGH SALES: With the economy in the grip of the credit crunch, Australian companies are finding it
increasingly difficult to get finance.

For new start ups - marketing products like novel software designs or advances in biotechnology -
the task has been made even harder with the cancellation of a $150 million Government program.

Critics say it could kill innovation in this country and with the financial crisis many companies
are asking for special treatment.

Rafael Epstein reports.

RAFAEL EPSTEIN: Sienna is a small company trying to find better, less invasive, painful ways to
test for cancer. Businesses like this rely on venture capital but they say they need a top-up from
Government.

That used to come from the $150 million Commercial Ready program, but now that's been cancelled.
The sector says that sent some start ups to the wall.

KERRY HEGARTY, CHIEF EXECUTIVE SIENNA: It already has. There's examples of beaut little companies
like Sienna being bought out by major US corporations with the dollar being 66 cents, we are juicy
targets.

RAFAEL EPSTEIN: At the time of the last Budget, Sienna had sent in a detailed funding bid for
$800,000 for the Commercial Ready program. But the rug was pulled from under their feet. Despite
the financial crisis, sometimes the money may be there, but it takes longer to find backers, and
that delay can be deadly

KERRY HEGARTY: The problem is, that year, with a small biotech, can kill you. So it's not just a
lost year necessarily, you may not exist because you're living on a shoestring.

PAUL KERIN, ECONOMIST, MELBOURNE BUSINESS SCHOOL: You just make more and more excuses for other
people to put up their hand and say, "Well, we want special treatment, too".

RAFAEL EPSTEIN: For some, the Government spent far too long creating complicated layers of policy
that don't really foster the best in business.

PAUL KERIN: Say, for example, if we did subsidise start-ups because they're losing money, well,
lots of established firms lose money, especially now. So should we subsidise every loss-making
company? Because if we don't, then we're distorting things in favour of start-ups.

RAFAEL EPSTEIN: The renewable sector also says it's in trouble. The Government's mandated a certain
amount of renewable energy through to 2025. But after that the target falls away, in the belief the
price of carbon will reflect the real cost of emissions.

LANE CROCKETT, PACIFIC HYDRO MANAGER: The problem of having the target falling away early is that
it doesn't give enough time to pay back the project. So when you're going down to your bank to pick
up some financing, the pay-back time's too short and they can't give you the money.

RAFAEL EPSTEIN: Pacific Hydro is one of the country's biggest renewable companies. They want a
mandated amount of renewable energy beyond the year 2025, for the target to be pushed out a further
five years.

LANE CROCKETT: You won't get a sustainable industry to grow, so your $25 billion of green
investment, your tens of thousands of green jobs, won't happen

PAUL KERIN: The Productivity Commission estimated a year or two ago that we give away $15.7 billion
to industry in about 100 different programs. That's about $800 per man, woman and child in
Australia. If we got rid of that and actually didn't tax people that amount, a typical family would
have about $3,000 $4,000 extra to spend every year. They'd create a lot of jobs.

RAFAEL EPSTEIN: The renewables and biotech sector say they don't want special treatment, they just
want help climbing onto the level playing field.

KERRY HEGARTY: The question is not supporting innovation important? That's a given? From France to
Canada to Europe, US. We know supporting innovation with Government dollars works. The question is
the process, how do we make it more efficient, the right managers, the right concepts and
accountability on the funds.

RAFAEL EPSTEIN: The Government says it's still thinking about a possible replacement for the
Commercial Ready program to help start-ups bring ideas to the market.

Rafael Epstein, Lateline.