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Tuesday, 28 April 1987
Page: 1934

(Question No. 1104)

Senator Jones asked the Minister for Industry, Technology and Commerce, upon notice, on 29 May 1986:

(1) What was the estimated, or proven, level of research by the Australian manufacturing industry in the financial years 1983-84, and 1984-85 in the following areas-(a) new technology, and (b) export marketing techniques.

(2) What is the projected level of research by private manufacturing industry in the current financial year and the next one.

(3) What positive encouragement and help in the field of private enterprise research is available to the Australian manufacturing industry from the Federal Government.

(4) What positive steps have been taken, or are being contemplated, by the Federal Government to establish viable new manufacturing industries with export potential.

Senator Button —The answer to the honourable senator's question is as follows:

(1) The Australian Bureau of Statistics (ABS) has estimated that expenditure on research and experimental development (R & D) carried out in Australia by business enterprises, in both private and public sectors, amounted to $721m in 1984-85. This represents an increase of 90% over 1981-82 ($380m).

For the manufacturing sector, the figure was $439m, an increase of 84.5% over 1981-82 ($238m).

In 1983-84, total business enterprise expenditure on R & D was estimated by the ABS at $402m; and the manufacturing sector at $228m. However, these 1983-84 figures, based on a sample survey only and subject to a margin of error of about 5% in either direction, are not strictly comparable to the 1984-85 and 1981-82 figures quoted above.

Current ABS data do not provide sufficient details to enable identification or estimation of R & D expenditure on new technology ((1) (a)), and export marketing techniques ((1) (b)). Following the introduction of the Government's 150% taxation concession for eligible R & D expenditure, it is expected that statistical information on R & D expenditures in Australia will improve.

(2) Some preliminary estimates of increases in the level of business enterprises' expenditure on R & D have been made. These are based on ABS statistics and registrations by companies of intended plans to take advantage of the 150% tax concession scheme for eligible R & D expenditure. These estimates show that businesses R & D performance for 1985-86 was about $1,000m, 40% higher in current terms than in the previous year, with a further increase of about 25% (to $1,250) in 1986-87.

(3) The Government's major program to support private sector R & D is the 150% tax concession for research and development expenditure. The tax concession has been set at a level which should provide a substantial stimulus to private sector research and development. It is designed to encourage companies to view technology as part of their overall strategic business and investment strategies, rather than an activity to be regarded as expendable in times of economic downturn.

The revenue forgone by the concession has been estimated at around $150m in 1986-87 resulting from eligible expenditure in 1985-86.

Recognising that many small, innovative, start-up companies typically do not have a tax liability, the Government has complemented the 150% tax concession with the Grants for Industrial Research and Development (GIRD) Scheme. Grants are also available for emerging technologies of fundamental importance to industry competitiveness such as biotechnology, new materials and microelectronics, and to support industrial research projects with significant national benefits. The Scheme will run for five years from 1 July 1986 and will cost $12.5m in 1986-87.

In the course of developing both the 150% tax concession and the supporting GIRD Scheme, attention was also paid to encouraging Australia's public sector research institutions to undertake more research in areas of relevance to the longer term competitiveness of Australian industry. The Government has made changes to the institutions themselves, such as the Commonwealth Scientific and Industrial Research Organisation (CSIRO), and to research funding arrangements in the higher education sector.

(4) Encouraging the establishment of viable new manufacturing industries with export potential is an integral part of the Government's overall industry policy objective of making all Australian industry more internationally competitive, export oriented and innovative.

The substantial depreciation of the Australian dollar has given existing and potential manufacturing and service industries a major opportunity to compete more successfully internationally. The Government regards the international competitiveness of industry as an important objective to which a wide range of Government programs can contribute. For example, to capitalise on the present opportunity the Government has aimed to maintain supportive macro-economic policies.

However, developing competitive new industries and expanding manufacturing activity requires active and comprehensive industry and technology policies in addition to the right macroeconomic conditions. Aspects of these policies which are particularly relevant to the creation of viable new industries, include:

support for innovation, including research and development, and the development of generic technologies;

the introduction of sectoral policies to hasten the emergence of new industries with export potential; and

facilitation of international co-operation between Australian firms and potential overseas business partners.

Support for Innovation

The Government considers innovation to be a driving force of future competitive advantage. Product innovation gives Australian firms the commercial initiative in world markets, opening the prospect of new manufacturing industries with export potential. Process innovation typically allows production cost reductions, quality improvements, and earlier or more assured delivery. Sales volumes can thus increase and export income, jobs and growth prospects for the innovating firm can improve.

The Government's key programs to support private enterprise research and development were outlined in the answer to Question (3) above. However, the Government's approach to encouraging innovation has been designed to extend well beyond R & D activities in isolation to ensure that each link in the chain of innovation receives integrated Government support.

Incentives for R & D activity, such as the 150% taxation concession for R & D expenditure and the Grants for Industry Research and Development Scheme are complemented by programs to assist the diffusion throughout industry of new technologies. Special assistance is provided to foster the emergence in Australia of `generic' technologies-technologies which offer the keys to international competitive success across a range of Australian industries in the future. Examples are new materials, biotechnology and information technologies.

To build on its assistance to R & D efforts, the Government has made venture and development finance available through the Management and Investment Companies Scheme and the Australian Industry Development Corporation. Making such finance available ensures that firms have the opportunity to commercialise the results of R & D investments.

For the production stage of the innovation chain, comprehensive assistance is available through the National Industry Extension Service to encourage improved production techniques and modern business practice. For the marketing stage, particularly export marketing, relevant Government programs include the revised Offsets Program, Government purchasing policies, the Buy Australian Campaign and the Export Market Development Grants Scheme.

Sectoral Policies

Special sectoral policies have been introduced to hasten the emergence in Australia of new industries with export potential. Sectoral policies of this type include, or are being developed for, the communications equipment industry and the information industries.

Such sectoral policies typically seek to utilise mutually supportive contributions by firms, industry associations, unions, Government agencies and research institutions to facilitate exports and growth in the sector concerned. The Government's role is primarily catalytic.

International Co-operation

Increasing attention is being given to facilitating international co-operation between Australian firms and potential business partners overseas. The aim is to ensure that Australian firms can participate in the rapid technological developments now occurring globally, and are in a position to utilise the technological, investment and marketing potential which international commercial linkages among firms can offer. The recent exchange of investment missions with Japan is an example.