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Wednesday, 9 November 1983
Page: 2469

Mr BARRY JONES (Minister for Science and Technology)(11.24) —I move:

That the Bill be now read a second time.

The purpose of this Bill is to extend the scope and to increase the effectiveness of the Australian industrial research and development incentives scheme. There can be few who fail to recognise the significance of advanced technology for the Australian economy. It is the key to the establishment of an internationally competitive industrial sector. It is crucial to the maintenance and growth of real national wealth. Both directly and indirectly it provides the means to create new employment opportunities and to maintain activity in traditional industries. Since 1967 successive Commonwealth governments have sought to encourage Australian industry to reduce dependence on imported technology, to increase indigenous innovation, and to undertake associated industrial research and development. The provisions of the Industrial Research and Development Incentives Act 1976 and the annual budgetary allocation made to the incentives scheme established by the Act are central to that purpose.

The Act provides for two distinct elements in its incentive grants. Manufacturing, mining and certain on-site construction companies with limited or no previous industrial research and development experience may obtain a legal entitlement to reimbursement of specified 'eligible expenditure'; that is, a commencement grant. The Act also empowers the Australian Industrial Research and Development Incentives Board, whose members are chosen for their experience in technology and commerce, to enter agreements on behalf of the Commonwealth. It may make grants to companies to undertake industrial research and development projects which might not otherwise proceed, or which could not proceed at a sufficient pace to maximise the market potential. The Board comprises 12 members , six of whom were appointed by this Government and one reappointed. On 28 September I had pleasure in announcing that Dr Kevin Foley had been appointed Chairman of the Board. It is a Board which I am confident will give full effect to the Government's intentions to use the incentives scheme as its primary instrument in directing investment to the development of sunrise industries. The Government has further demonstrated its commitment to technology development in industry by increasing the budgetary allocation for 1983-84 to the industrial research and development incentives scheme by 15 per cent in real terms, with an even greater proportionate increase to the amount available for new projects which the Board may support.

Despite its importance, industrial research and development has little purpose unless achievements are realised through commercial gains. This Government has foreshadowed action to stimulate the venture capital market, whose past inadequacies or, indeed, total absence, have frequently ended prospects of Australia benefiting from highly promising industrial research and development activities many of which have then gone off-shore. Provisions of this Bill extend that concern to assure a commercial reality to grant supported industrial research and development projects. They enable the Incentives Board, or AIRDIB, as it is known to its intimates, to provide advice to financial intermediaries and others from whom an applicant may be seeking venture capital, if the company in question wishes it. I have also asked the Board to be alert to the possible shortcomings or difficulties in the prototype or development phase and to steer applicants quickly in the direction of appropriate government or private sector assistance or expertise. Taken together these actions could significantly increase the effectiveness of the industrial research and development incentives scheme at no cost to the Government. I say frankly that we have modelled this measure on what happened when we revived the Australian film industry at the beginning of the 1970s. That kind of advice was available to prospective lenders , if requested.

On 15 September I announced the relaxation of a policy which, until then, had restricted grant support to the computer software development industry. It was confined to projects directly related to new products of, and new or improved process employed in, manufacturing, mining, or eligible on-site building or construction activities. AIRDIB may now enter agreements for software development in the important growth areas of computer systems development and in the provision of both tangible economic sector and information sector services. Support is subject to the proposals meeting specified criteria which I have directed the Board to employ.

Dr Harry Edwards —Not part of the Bill?

Mr BARRY JONES —The criteria simply give the Minister the power to do so and to be flexible. I think it would be unduly restrictive to put it in the Bill. These criteria emphasise the need for a significant industrial research and development component to any proposal; a substantial advance over existing software in the field of application; and a demonstrable plan to exploit the software as a product. In other words, if we have 57 varieties of software, we cannot merely say: 'All right, we will get some money to bring on the fifty- eighth variety'. It must be new and it must be exportable.

The Government has decided that it would not be appropriate to make similar extensions to entitlements under the commencement grant element of the incentives scheme. To do so could raise false expectations that the Government was prepared to subsidise software development of a 'routine' or 'in-house' nature. Such work offers no significant national benefits. In many instances, the company would have no need of a publicly funded incentive to undertake the work anyway.

The provisions of this Bill, which relate to the definitions in the principal Act, are directed to clarify that Act in respect of software eligibility. In themselves they do not involve additional Budget costs. However, the demand for support consequent on extension to eligibility of software development companies is estimated to amount to about $5m per year. This demand was anticipated in the 1983-84 budgetary allocations and no further amount will be sought this year on this account.

Increasingly, industrial research and development has been undertaken by companies dedicated to that purpose. In many instances these entities are precluded from the incentives scheme because they are not, nor can they be deemed to be, 'eligible companies'. The eligible companies in effect are essentially manufacturers. Yet many, including research associations, perform a valuable function as 'multiplier agencies' because they can provide the benefit of their efforts to a number of companies. The Bill provides that this exclusion be removed. Companies proposing to undertake specific industrial research and development projects on behalf of two or more unrelated corporate clients, at least one of whom shall be an 'eligible company', will be able to seek a project grant. I refer to companies such as A. E. Bishop and Associates in Sydney, of which I am sure the honourable member for Berowra (Dr Harry Edwards) is well aware, which is designing steering equipment used internationally but which is not manufacturing. The discretionary nature of these grants will ensure that funding support is provided only where the applicant is acting as a multiplier agency. This provision will increase the effectiveness of the industrial research and development incentives scheme at no cost. The remaining changes proposed by this legislation relate to essentially technical matters.

The Bill introduces provisions to empower AIRDIB to specify limits to the field of expertise or activity for which industrial research and development work is supervised by an 'approved employee' within the applicant company or performed by an 'approved research organisation' on its behalf. The ability to limit approvals in this way is desirable because of the increasing specialisation in research and because the existing provisions allow only for revocation and then only if approvals have been misused or abused. There is no evidence that this has occurred to any significant extent to date. There will be no budgetary costs in this, nor are there any identified savings.

The incentives scheme has been subject to a complex statutory provision governing forward commitment. This has conflicted at times with budgetary dictates. The provisions of the Bill will eliminate these difficulties and establish simple means to specify limits to expenditure and limits to the commitments into which AIRDIB may bind the Commonwealth through project grant agreements.

Finally, the Bill provides that a cut off date for receipt of commencement grant application may be deferred by regulation beyond 30 September. I assure the House that this provision is necessary. There is, at present, no discretion available to the Minister to allow for a deferral or variation of the cut off date. The Canberra mail strike, which carried over from September to October this year, prevented many claims reaching the Board before the due date. Without enactment of the provisions in this Bill, many would be denied their prospective entitlements. I believe the implementation of the provisions of this Bill will be welcomed in industry. I commend the Bill to the House.

Debate (on motion by Dr Harry Edwards) adjourned.