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Tuesday, 4 December 1973
Page: 4231

Mr LYNCH (Flinders) - This Bill seeks to amend the principal Act by limiting the amount of finance payable under the selective grant provisions of the Act and to alter the provisions with respect to professional qualifications. The Industrial Research and Development Grants Bill was introduced in 1967. In introducing the Bill the present Deputy Leader of the Australian Country Party (Mr Sinclair) outlined the former Government's objectives in these terms:

The main benefit will be the introduction into Australian industry of new products and processes particularly suited to Australian raw materials and conditions and to Australian demands. This will mean in the long run greater industrial efficiency with the consequent reduction in costs of production. This in turn will lead to a greater ability to compete with imports and to increase exports. New products resulting from Australian research and development will be free of overseas royalty and licensing payments and of the restrictive export franchises often associated with products made under license from abroad. Being available for export, the products and processes so developed with the encouragement of this scheme may earn Australia additional foreign exchange. All these matters, of course, have important implications for our balance of payments.

Another benefit will be the greater ability of Australian industry to service and manufacture the increasingly complex requirements of modern defence. The scheme is also designed to encourage the greater development of Australia's natural and human resources. It will assist in achieving the maximum benefits from professionally and technically trained Australians. Additional benefits also can be expected from the research now carried out in government financed institutions. In addition it will assist in attracting top-class industrial research and development staff from overseas and will also reduce the drift abroad of our own top graduates.

The scheme, subject to the amendments during 1972, has I believe been an outstanding success. In introducing the scheme the former Government was particularly aware of the relationship between research and development and productivity.

Despite this particular program it remains true today that expenditure on research and development is not yet approaching what could be regarded as an optimal level. There are many companies with a technical capability which are still not undertaking research and development and there is clearly major scope for companies currently engaged in such programs to increase the level of their research activities. Information available last year showed that of some 13,000 manufacturing and mining companies consulted by the former Government, only 1,320 had incurred any industrial research and development expenditure in 1968-69 and only 546 companies qualified for a grant in respect of that year. The Industrial Research and Development Grants Board would indicate that there has, nevertheless, been an overall improvement. The Board made the following comments:

Assessed expenditure or, where not yet assessed by the Board, claimed expenditure on industrial research and development in terms of the Act of all 1971-72 grant applicants approximated $75. 8m, being $6 1.7m work expenditure and $14.1m plant expenditure. Work expenditure of those companies in 1971-72 represented an increase of 295 per cent on that expended in the 1965-66 base year. Of the 902 applicants for the 1971-72 grant year, 549 companies (61 per cent) did not incur any expenditure, in terms of the Act, on industrial research and development in 1965-66.

On a man-year equivalent basis, applicant companies in the 1971-72 grant year employed solely on industrial research and development some 7,900 employees, of whom 2,700 were professionally qualified, the balance being technical employees working in direct assistance to them. In the 1965-66 base year, employees so engaged by these' companies' approximated 3,800. In other words there has been an increase of approximately 108 per cent in the number of such employees.

The continuing increases in the number of grant applicants, in the number of personnel engaged in industrial research and development, and in industrial research and developoment expenditure, (after making due allowance for increases in salaries and other costs) clearly indicate that the objective of the Act is being achieved.

The Opposition parties recognise that this legislation has had beneficial results. We propose to support the Bill before the House, but in doing so a number of comments should be made.

First the Bill seeks to impose a limit on the amount of finance with respect to a grant payable under the selective grants provisions. This means, in practical terms, that the maximum total grant payable to a company for its 1972-73 industrial research and development spending would be $225,000, made up of a general grant component of $25,000 and a selective grant component of $200,000. Although the Bill contains provisions to waive these limitations the Opposition believes that it should be made clear that in terms of the national interest, grants in excess of the financial limitation proposed by this Bill, have been most beneficial. In fact it must be appreciated that at the present time the major proportion of research and development in this country has been largely undertaken by the larger commercial firms. Because of the provisions which allow the limitations to be waived, the Opposition does not seek to amend the Bill. We would point out, however, that because the majority of the grants for 1972-73 will be paid out of the 1973-74 Budget allocation, the limitation provisions will have a retrospective effect.

Section 20 of the principal Act prevents the Minister from giving a direction as to the level of grants which would affect prejudicially any application for a grant in relation to a grant year commencing before the date of any such direction. This prevents any variation in the percentage level for general grants after commencement of a grant year. In the same way, it prevents the Minister from interfering with the discretionary power of the Grants

Board under section 27 to approve grants of up to one half of expenditure of a company applying for a selective grant. It is therefore a matter of concern that the Government should seek to amend the Act after the close of the 1972-73 grant year so as to give a direction which the Minister was prohibited from giving under the principal Act, once the 1972-73 grant year has commenced. Because this element of retrospectivity is subject to review in respect of particular grants the Opposition does not propose any course of action other than to draw attention to it.

The Government has been unprepared to take proper account of the problems associated with planning and budgeting with respect to a number of the legislative measures put before the House during this year. The question of retrospectivity in relation to this Bill reflects the approach adopted by the Government with respect to the Income Tax Assessment Bill. The provisions of that Bill sought to withdraw dividend exemption from existing exempt income standing in the accounts of mining companies rather than future investment. Previous practices in all comparable circumstances have sought to make transitional provisions to take account of forward planning requirements. Therefore, the principle of retrospectivity in this legislation appears to have been accepted as a common practice by this Government, and we strongly object to that approach.

The Bill seeks to amend the Act to allow companies which are performing useful research and which at present are excluded from consideration for grant purposes due to an inability to meet the professional qualifications requirement, to be so considered by the Board. The Opposition supports this provision because of its potential benefits to a number of smaller firms whose staff have a high level of practical expertise which enables them to effectively undertake worthwhile research and development programs. The Act, as originally conceived by the former Government, sought to encourage the provision of employment opportunities within Australian industry for professionally trained research and development personnel and laboratory assistants. While we believe that this should remain as a fundamental aim of this program we nevertheless accept the Government's reasoning that the amendments proposed by this Bill will not work to diminish that original objective but will provide a useful degree of flexibility.

In his Budget Speech the Treasurer (Mr Crean) announced that the Government would undertake a review of the industrial research and development grants scheme. The Opposition supports such a review. The inquiry conducted into technology within Australian industry by International Technical Services in 1972 formed a number of conclusions which,' in general, pointed to the need for increased levels of research and development in Australian industry. The report also listed a number of ways in which the Government could assist the diffusion of technology in Australian industry:

Subsidise or assist more research and development in a central organisation functioning separate from industry. Such research should be carefully selected and fully integrated with work overseas.

Have more government funded research undertaken in suitable laboratories of private industry.

Ensure government purchasing power is used in encouraging Australian industry to accept and use the latest technology.

Examine ways in which educational bodies can promote and instruct new technologies as distinct from accepted technologies.

Examine what further government encouragement can be given to management training. Assist travel in relation to new technology.

Encourage local manufacture where possible but ensure that protection or assistance does not create an industry inefficient by world standards.

Provide incentives in specific fast changing areas for the introduction of new, capital intensive technology by:

(a)   Direct assistance to purchase.

(b)   Special depreciation allowances.

(c)   Investment allowance.

(d)   Guarantees to reduce financial risk.

Ensure that government factories adopt new technologies at an early date.

Examine ways of encouraging industry to buy advanced technology from overseas countries for the greatest benefit.

Carry out strategic planning in conjunction with industry.

Any review of the existing scheme should take into account not only the existing policies which seek to encourage research and development but also the experience and practice in comparable countries and the nature of the recommendations to which I have referred. I believe all parties in this House recognise the benefits to the nation of research and development, especially in an economy such as Australia's where lack of scale and problems of isolation from world markets have particular implications for our growth and development.

Finally, I want to refer to the report of the Coombs task force. The report's comments on the scheme were somewhat ambivalent. It referred to the report of the interdepartmental committee in December 1971 which concluded that 'a sigificant part of the industry's increased industrial research and development expenditure may be attributed to the incentive'. It also referred to the fact that a large proportion - 17 per cent in 1971-72 - of the funds has gone to overseas owned or controlled companies but acknowledged that changes were made in the new scheme. However, the Opposition is very concerned by the following paragraph in the report:

It could be argued that the scheme has now largely achieved its objective of making Australian industry fully aware of the advantages of industrial research and development and that in consequence it could now be phased down or phased out. There is scope for determining the overall amount to be allocated for the scheme in the annual budget context; the Board could accommodate a reduction by reducing the rate of selective grants payable under the Act.

If any review undertaken by the Government adopts that philosophy Australian industry will be substantially disadvantaged. What is required is the type of review which seeks to maximise and co-ordinate existing programs so that Australian industry will be encouraged to reach an optimal level of involvement in research and development. The Opposition Parties support this Bill, and in so doing trust that the Government will consider the diverse series of questions which have been raised during this debate, particularly when the legislation is under review in the period ahead.

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