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Wednesday, 8 August 2001
Page: 29405

Ms JULIE BISHOP (12:01 PM) —While the members opposite, including the member for Paterson, were lamenting this country's record on research, development and innovation, and as they talked down this country's efforts in that regard, the Minister for Industry, Science and Resources, Senator Nick Minchin, was announcing—just an hour ago—$16.4 million worth of research and development funding for innovative projects in my state of Western Australia. Twenty-seven innovative Western Australian companies have now received funding worth $16.4 million for research and development projects under the federal government's R&D Start program for the 2000-01 financial year. This was announced at 11 a.m. today. Broken down, by industry sector, 10 projects in engineering and manufacturing received $5.3 million, 11 in the IT&T sector received $8.3 million, and, in the biological sector, six projects received funding of $2.7 million.

Nationally in all business sectors, 247 projects received funding today worth $202.7 million—an increase of over $25 million, compared with almost $177 million for 219 projects the previous year. These funding levels provide positive evidence of the government's commitment to providing the necessary funding to Australia's creative talent in the field of R&D. It reinforces the steps that the government has taken in the innovation area. This government is constantly working at making available to business and industry the most appropriate means of undertaking research and development and of commercialising their products. The contrast between what we have been doing, by virtue of the announcement by Senator Minchin today, and the lamentable talking down of this country by the members opposite could not be more stark.

I cannot allow the member for Griffith's contribution to this debate to pass without comment. He lampooned the government's response to this make or break ALP policy, Knowledge Nation. Let us assume that the government is being partisan about it. Let us just assume that the government does have a jaundiced view of the credibility of this Knowledge Nation policy. But let us see what others have said of it. If they do not accept that we have grave doubts about the credibility of Knowledge Nation, let us see what others have said. Tim Colebatch of the Age wrote:

My rough guess is that to implement the report's wish list would require taxes to rise by about five percentage points of GDP, or $35 billion a year ...That is not possible

Terry McCrann of the Daily Telegraph wrote:

It is difficult to think of something dumber than to unveil a plan that might cost up to $35 billion on some estimates, more than the GST, and leave everything hanging. Beazley has done precisely the wrong thing in not identifying what he would do, at what cost, and how it would be funded.

The editorial in the Adelaide Advertiser asked, `Where is the money coming from?' Tim Colebatch, again, wrote in the Age:

I doubt that this report will help.

It opts for a utopian approach rather than a practical blueprint. It is a vast wish list of everything the taskforce would like Australia to be, without any agenda on how to pay for it.

And we are criticised for not engaging in debate on this. Catriona Jackson wrote in the Canberra Times:

The doubling of spending on research and development would cost around $5 billion a year. To raise this sort of money the ALP would have to halve the defence budget or massively increase income or company taxes.

The Hobart Mercury stated in an editorial:

Since Knowledge Nation is unfunded and uncosted, the scientific community and Australian taxpayers face the big question: Where will the billions come from to pay for it all—

Michael Duffy wrote in the Daily Telegraph:

Just when you thought it might be safe to go back into the water and give Labor a go, another great cloud of Beazley waffle rolls in from over the horizon. The fact that it is unaffordable suggests they cannot do sums ... Not a great asset in people aspiring to be the great educators of the nation.

Tony Boyd wrote in the Australian Financial Review:

If Beazley is serious about implementing the recommendations of his task force, he will have to embark on a fresh round of tax reform.

Jane Richardson wrote in the Australian:

As a whole, Knowledge Nation is politically undoable.

Stephen Matchett wrote in the Sydney Morning Herald:

For all the breathless optimism at what the future promises for an education-focused Australia, there are glaring gaps in Knowledge Nation, most notably how it could be paid for and how it would help individuals.

Simon Hayes wrote in the Australian, `The ALP's Knowledge Nation report has failed to excite the IT industry.' Ian Grayson wrote in the Australian: `The Knowledge Nation report sparks feelings of déjà vu followed by an uncontrollable urge to yawn.' It goes on and on. Never mind the government's approach to this undoable policy. The fact is that the Labor Party needs to have a long, hard think about what it has been doing and what it has been saying in relation to Australia's research and development commitment.

It is often said that politics is a matter principally concerned with perception, and perhaps never more so than in Australian politics today. In an age of mass media, with information consumers seen to be peeling off into apathy, disregard or a fragmented specialisation of interest, there is a real danger that some of the media of this country will come to generate its own reality. Whereas the chroniclers of a past age shaped that age's future interpretations to meet their contemporary biases and interests, we now face the prospect of our contemporary chroniclers, our nation's media, shaping not simply future but present understandings. This comes back to my point about the lie that is being peddled by the Labor Party over this country's commitment to R&D and its achievements.

It seems that the Labor Party have encapsulated within their thinking a lie that is seemingly being peddled as a fact. For too long, a false evaluation has been made of Australia's innovation and enterprise, more particularly of the Commonwealth's contribution to it. For too long the Australian public has been treated to this contrived morality play in which a false barren present is somehow being contrasted with an equally false bountiful past. I am not shooting the messenger here. The Australian Labor Party are perpetuating these myths, and it is a sad reflection on their commitment to the betterment of this nation. The past that they keep talking about—the notion that, prior to the 1996 budget, Australian R&D and its practitioners enjoyed some kind of perpetual government supplied rapture—does not equate with the facts of the matter, yet this is the lie the Labor Party continue to peddle.

Pre-1996 business expenditure on research and development was 25 per cent lower as a share of GDP than the OECD average. Labor cannot run away from that. The poorly conceived 150 per cent tax concession for research and development threatened the financial stability of the Commonwealth at a time of massive deficit but failed to properly assist genuine research activities. The concession opened up public policy to gross abuse for tax minimisation purposes while, at the other end, the then government—the members opposite—was slicing $60 million in triennial funding from Australia's premier public research body, the CSIRO. In the background, Australia's manufacturing trade deficit increased from $7.7 billion to $26.2 billion by 1995. Investment in knowledge activities—the very stuff that this Knowledge Nation pamphlet supposes to consider—lapsed under the previous government.

In the decade that ended in 1995, our nation's investment in knowledge fell from 6.47 per cent of GDP to 6.1 per cent of GDP. This represented a level of investment 40 per cent below Sweden, almost 33 per cent below Finland, over 25 per cent below the United States and 14 per cent below the United Kingdom. What is the source of these figures? It is the very report commissioned by the Leader of the Opposition and referred to by the member for Griffith, who failed to mention that, in the 10 years from 1985 to 1995—when Labor was in office—our investment in knowledge fell. Just as the visions of an idyllic past being sold to us by the members opposite are without foundation, so are the question marks some are seeking to place on our present circumstances.

It might surprise some listeners to this debate that in the government's first budget—1996-97—at a time of calamitous fiscal deficit bequeathed by the departing government, public sector research funding was raised to its highest ever level in real terms. At 8.5 per cent of GDP, Australia has one of the best funded public research sectors in the world, ahead of nations like Japan, Canada, the United States, the United Kingdom and Germany. In the past five years, the Commonwealth has established the Prime Minister's Science, Engineering and Innovation Council. We have seen the completion of the first comprehensive scientific capability review for many years. The R&D Start program has been built up from $735 million, with a further $338 million being made available to fund future project expenditure. Most importantly, the government's industry and innovation policy, Backing Australia's Ability, will stimulate research through: an additional $736 million for Australian Research Council competitive grants, representing a doubling of funding by 2005-06; a boost to research infrastructure funding by $583 million; the commitment of an additional $176 million for world-class centres of excellence in the key enabling technologies of information and communication technologies and biotechnology; $155 million for the support of investments in major national research facilities; the expansion of the Cooperative Research Centres program, with an additional $227 million in funding and a greater focus on access by small and medium enterprises. The expansion of this program is leading to quite exciting research outcomes. The type of research, the level of cooperation and the synergy with different research institutions is really at the leading edge, and we should be proud of the companies—the small and medium enterprises particularly—which are engaging in this program.

There is increased funding for universities to upgrade their scientific and research equipment, their libraries and their laboratory facilities. There has been reform of the R&D tax concession, including the provision of a premium rate of 175 per cent for additional related R&D activities, which I will come back to in a moment. There has been the tax rebate equivalent to the R&D tax concession to help the growth of small companies in tax loss. Furthermore, Backing Australia's Ability will accelerate the commercialisation of the product of research and development by expanding the Cooperative Research Centres program, which is a move that I applaud. A number of research institutes in my electorate of Curtin, particularly the University of Western Australia, are involved in a wide range of scientific endeavour within the CRC program.

Backing Australia's Ability will lead to the doubling of the value of the Commercialising Emerging Technologies program to provide early assistance to firms to commercialise skills. A $100 million innovation access program will be introduced to help business access the best technology in science from Australia and overseas. A competitive pre-seed fund for universities and public sector research agencies will be established to help turn ideas into products and into jobs. There will be a doubling of funding for the biotechnology investment fund to encourage the growth of new biotechnology firms. There will be an extension and development of the commercialisation of new agribusiness products and services and technologies. The impact of the new business tax arrangements will be monitored. There will be a strengthening Australia's intellectual property regime. All in all, Backing Australia's Ability represents about a $3 billion investment over five years in Australia's scientific and industrial future. How can the members opposite say with any credibility that the government is deserting the R&D field? That is nonsense. It is ridiculous to say that. But we know why they persist in doing it: they persist in talking down this nation.

One of the particularly important factors in Backing Australia's Ability is the reform of the system of tax concessions for research and development undertaken. These reforms, which are the subject of the bill before the House, include: the tightening of eligible research and development activities so as to prevent unintended access to the concession through uneconomic and unscientific activities—and, in the wake of past Federal Court and Administrative Appeals Tribunal decisions that have done precisely the opposite, this is obviously needed; the provision of an effective life write-off of plant used for research and development purposes—a move that will, with the assistance of some amendments that I understand are being sought by the government, bring these plant expenditure provisions into line with the uniform capital allowance regime; the introduction of a refundable tax offset for use by smaller companies in a tax loss situation—which will clearly enhance the benefit of the R&D tax concession for small companies and improve their cash flow during their initial growth phase; and, as I mentioned previously, the introduction of a 175 per cent incremental concession that will enhance deductions for certain expenditure where the company concerned has increased its research and development expenditure beyond a three-year average—the particular expenditure concerned being that which relates to labour related costs—which will have spill-over benefits for the broader Australian economy.

This final measure, the 175 per cent incremental concession, represents an increase of $540 million in the Commonwealth's contribution over five years to 2005-06. This will generate further research and development, while providing greater stability and certainty for companies involved with the concession. These measures are designed to give effect, in the tax concession sense, to the government's strategy to encourage investment in business research and development. After the passage of this bill, the Industry Research and Development Board will seek to monitor the impact of the reforms, particularly the capacity of businesses to claim the premium concession. In this way, the Commonwealth will safeguard against any unintended consequences that plagued previous concession schemes. It is appropriate that the impact of regulation on business be monitored. Essentially, this legislation impacts upon companies undertaking R&D activities. In the long term, I think this will enable companies to better interpret what R&D activities are eligible and thereby encourage the use of strategic planning. The removal of the exclusive use test will enable companies to claim the R&D tax concession where plant is being used only partially for R&D, and that is obviously a sensible reform.

The bill and its reforms, together with the whole Backing Australia's Ability package, put the lie to claims that Australian research and development, and, by extension, Australian science, industry and education, are ill-serviced by the incumbent government. That is not the case—the facts and the statistics bear out the reality. Australia has reason to be proud of its research and development record. The announcement today by the Minister for Industry, Science and Resources of $202.7 million worth of funding for innovative R&D projects clearly bears out the government's commitment to providing the necessary funding to Australia's creative talent in the field of R&D.

I would suggest that, instead of spending time constructing false pasts and mischievous presents, those sitting opposite ought to work with the government to ensure that Australia is well served by her politics, not handicapped by it. Is it too much to hope for a constructive contribution from the opposition? I commend the bill to the House.