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Thursday, 12 November 2015
Page: 8511


Senator McALLISTER (New South Wales) (16:52): I rise in support of the motion and I particularly wish to speak to the first point: the failure of this government to articulate a comprehensive innovation policy so that Australia has the high-skill, high-wage jobs of the future. I do that in the context where, in recent weeks, we have heard a lot of rhetoric from the government about innovation. In question time we heard about agility, nimbleness, disruption and alignment. It is like a giant Dilbert cartoon over there on the government benches, or perhaps just a very big game of innovation buzzword bingo. But talking does not make it so, because we have not heard very much that is meaningful and we have not really seen any action from the government. Indeed, the action that we have seen over recent years has been simply this: the comprehensive dismantling of the innovation system that was put in place under a Labor government to address the very challenges that we now must confront if we are to maintain our standard of living.

Unhappily, this is a government for whom economic reform has been reduced to just one single task: finding ways to shift the tax burden from the rich to those who can least afford it. This is a government for whom innovation means finding new and perhaps exciting ways to cut essential services for Australian families and to take a step closer to their ideological dreams of Americanised health and education systems. That is not our way and I want to spend some time this afternoon speaking about why the task of innovation is important and why the economic reform task is much broader than those opposite me generally think. It is as simple as this: we must innovate if we are to secure our living standards. Former Treasury chief Martin Parkinson has warned that Australia would be sleepwalking into a real mess if growth does not pick up. He said that, if growth remains closer to 2.5 per cent than to three per cent, then five percentage points would be shaved off our GDP over the next decade.

What do we have to do to tackle this? We must diversify our economic base, and innovation is essential to this project because we must become less reliant on commodity exports. We also need to be in a position where we can take advantage of commodity booms when they do arise. This means being in a position to value-add. You cannot do that from nothing. You need an existing and robust manufacturing sector that is underpinned by a strong national innovation system so that when opportunities arise, when demand grows globally for our product, for our commodities, we have the skills, the technology, the businesses and the knowledge of global supply chains and we can extract the value that we deserve from the commodities that our agricultural sector produces.

I have spoken recently in this chamber about the huge demand for Australian food products overseas, particularly in China. We are selling ourselves short if we simply export unprocessed soft commodities. We must be transforming those at home in order to extract more value—the value that we deserve for ourselves and that will secure our place in the global economy. The problem is that productivity growth underpins economic growth. I have been privileged to participate in recent months in the Senate innovation inquiry which has spoken at length with a range of people—businesses, academics, researchers and advocates—about their views on innovation and its significance for our economy. In that process, we started with the Productivity Commission, who note that innovation and diffusion of new and better production methods are the core drivers of productivity growth. We need to get more and more highly valued outputs from any level of inputs. The OECD states that the capability to bring innovation successfully to market will be a crucial determinant of the global competitiveness of nations over the coming decade.

Closer to home, Professionals Australia tell us that innovation is a driver of both productivity and economic growth as shown by the United States, where half of the economic growth in the last 50 years can be attributed to scientific innovation despite a decline in mining productivity. Our very own CSIRO, our much loved institution, told us that, with over 60 per cent of Australia's productivity growth due to innovation, it is clear that Australia's future prosperity in large part relies on the ability of our innovation system to translate research and development outputs into innovative new products and services that enable Australia to remain internationally competitive.

It is so frustrating to know that, even with this advice being provided to us continually, there is so little action on these questions by the government. When we look at where we are now, we can see that there are very significant problems with Australia's position. The committee heard statistics that reveal that only 1.5 per cent of Australian companies developed new-to-the-world innovations in 2011 compared to figures of 10 to 40 per cent for businesses in other OECD countries—countries we would ordinarily like to compare ourselves with. As of 2008, an estimated 98 per cent of new technologies were sourced from outside Australia. This is a challenge that we simply cannot allow to go unaddressed. The inquiry has considered some of the drivers that sit behind this poor performance. It has identified a lack of innovation culture and an appetite for risk. That is something that we can encourage from a government perspective by using our own procurement processes to encourage innovation in the businesses that we work with, such as suppliers to government.

The inquiry has identified low levels of mobility between the business and public sector research and development organisations. Only 30 per cent of researchers in Australia work in industry. This figure compares to an OECD average of 60 per cent and a United States figure of 80 per cent. Unhappily, and it is a related problem, only four per cent of Australia's large firms collaborate with research organisations of any kind and only a slightly higher proportion of small- to medium-sized enterprises. This is a problem that we must solve. We have enormous capability in our research sector, and it must be harnessed. We must attach it to our business activity so that we can reap the gains of the investment that we are making in research in our research institutions.

The committee has also highlighted the problems we experience in translating Australia's highly regarded research into economic outcomes and has spoken about the need to ensure that research infrastructure addresses the industrial, social and economic problems of significance to the nation. It has also identified lower innovative activity amongst SMEs when compared to larger firms, noting that, while 74 per cent of large businesses in 2012 and 2013 were classified as innovation active, only 34 per cent of businesses with zero to four employees, 51 per cent of businesses with five to 19 employees and 63.4 per cent of businesses with 20 to 199 employees were classified in this way.

We have spoken in these proceedings about the declining participation rates of Australian students in science subjects and of tertiary students in studying science and engineering. Australia ranked 73rd of 143 countries in the Global Innovation Index in 2014, in terms of the percentage of total tertiary graduates who studied science and engineering. I am most proud of my colleagues led by Bill Shorten and my colleagues in the shadow economic portfolios who are bringing forward concrete proposals to lift the participation of students in STEM subjects and, particularly, to lift the participation of women in STEM subjects. We know that women's participation will have enormous significance for their ability to participate in highly skilled work and highly paid work and go some way to closing the gender pay gap, which remains a significant problem for this country.

What this all points to is that there is no single thing that we must do to resolve the challenges around productivity and growth. What is required is a systems approach, as recently pointed out by the BCA's chair, Catherine Livingstone. When Labor were in government, that was exactly the approach that we took. We understood that we needed all of the different parts of the system to talk to one another and that allowing the silos to continue between private enterprise and public institutions was not tenable and would not deliver the outcomes that we were looking for.

We made a record investment of $9.6 billion in science, research and innovation in the last financial year of the Labor government. We budgeted for an almost 100 per cent increase in university funding from 2007 to 2017. We introduced the Future Fellowships and Researchers in Business schemes, supporting early- and mid-career researchers to get their career on the way and connect them with industry. We created Enterprise Connect, a program that, unhappily, the government has slashed. It helped to get more than 21,000 SMEs access to technology and expertise to improve their productivity. We launched Commercialisation Australia, another program axed by this government, which provided more than $200 million in grants to more than 500 firms. On average, the program raised two dollars of private capital for every one dollar of government money invested.

We replaced the former R&D tax concession with a better targeted R&D tax incentive. In the first year alone, we saw a 49 per cent increase in the number of new firms that were undertaking R&D. We committed to introducing quarterly tax credits to the R&D tax incentive because we understand the needs of business. We set aside $500 million in funding to establish 12 innovation precincts. I have had the very good fortune to see some of the work being done in some of those precincts in my hometown of Sydney.

Of course, it is a very different story when we come to the government. Despite all the talk that we have heard in this place about innovation, the record of the government is that they have been completely unwilling to take any steps in innovation and instead have set about dismantling the infrastructure that we put in place. Let's have a look through it. They have cut the R&D tax incentive. They have axed programs like Commercialisation Australia, Enterprise Connect, the innovation precincts and the Innovation Investment Fund. They cut $115 million from CSIRO, one of the most respected public agencies in this country and which is responsible for some of our most important innovations. It is one of the most important institutions focused on mission-directed research and directly collaborating with industry on many projects. The evidence from CSIRO workers to the committee was that at the moment, in a desperate effort to make up the funding cuts that have been imposed on them by this government, they are being transformed from researchers into consultants. The enormous innovation capability of that organisation is being substantially diminished by the need to find short-term projects to bring in cash to sustain the organisation. That is a very sorry state for an institution that is well loved by many Australians.

The government has still not abandoned its plan to cut funding for Australia's universities. We wait to see whether they will walk away from their $100,000 degrees. But we know, on this side of the chamber, that universities are at the centre of any national innovation system. Our approach would always be to support universities to maintain their engagement with Australian firms. In this context, it is so disappointing to hear the remarks in this chamber during this debate which do nothing but attack the Labor Party for pointing out these very simple and basic facts. We heard earlier from Senator Johnston, who repeated the old line that the government understands that all we need to do is get the economic fundamentals right. The truth is that nobody in this chamber disagrees with that proposition—and certainly nobody on the side of the chamber that I represent. In fact, Prime Minister Hawke and Treasurer Paul Keating understood this in the 1980s, and it is their legacy that has underwritten the last 20 years of Australia's economic performance. But that was in the 1980s.

The truth is that, for economies in 2015, just getting the fundamentals right is not enough. It is necessary—and everybody here understands that it is necessary—but it is not sufficient. It is not sufficient for a modern economy, because all successful economies that seek to provide good jobs, diverse industries, exportable products and high standards of living for their citizens understand that they must have a clear articulation between their research capabilities and their business activity, and this is something that has been heinously overlooked by those opposite us.

I conclude by observing that, sadly, despite all of the talk about innovation, it is my confident prediction that this will be a government remembered for its wasted opportunities on this front. It will be remembered for abandoning Australian manufacturing at a time when the high dollar was putting pressure on it. Instead of supporting that industry, this government simply encouraged manufacturers to walk away from this country. It will be remembered for absolutely failing in its obligation to take seriously the potential of the many researchers, the many innovative individuals and the many people with enormous skill and potential who could be contributing to this country but are stymied by the inability of the government to take innovation seriously.