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Address to the Australian Industrial Research Group, Canberra.



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Senator the Hon Eric Abetz Shadow Minister for Innovation, Industry, Science and Research

Address to the Australian Industrial Research Group

Canberra, 27th August 2008

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Thankyou [Alexander Gossling (President); Errol McGarry (CEO)] for

that kind introduction.

And more importantly, thank you for the invitation to speak to you

tonight.

It is a fact that when in Opposition opportunities to share one’s ideas are

difficult to come by; even more so as early as we are into the term of a

new Government.

The practice of holding a dinner the evening before your annual

conference where the Opposition is asked to attend and speak is, I

understand it, a long-standing practice of the AIRG, and one which I

believe is reflective of your organisation’s understanding of the way our

political system operates.

For while it is of course critically important for organisations such as the

AIRG to engage with the Government of the day, it is also important for

you to engage with the alternative government.

Not only will we be the Government one day, we also play an important

role in holding the Government of the day to account, and can through

processes such as question time, Senate Estimates and even votes on the

floor of the Senate actually deliver outcomes to the world of research.

So I suppose what I’m saying again is, thanks for having me, and let’s

keep on talking!

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The theme for tonight’s dinner and tomorrow’s conference is "Australian

Industrially Oriented R&D towards 2020", with the idea being, I note,

that it would nicely tailor in with the Cutler Innovation Review due to

have been released last month.

Of course, Cutler has been given a month’s extension, largely no doubt

due to the need to rewrite large swathes of his report because of the

Government’s short-sighted decision to axe the Commercial Ready

program in the May budget - but more on that later.

So albeit without the benefit of that review to inform us, I propose to say

a few things tonight about how I see industry R&D and Government

interacting into the future under a Coalition Government

In doing so, I’ll of course offer a critique of what the new Government

has done to date (you wouldn’t expect otherwise!);

And then, importantly, I’ll try and field your questions and definitely

absorb your ideas.

Innovation and invention - our future

Innovation and invention drives the human race forward. And it drives

our country forward.

Without innovation and invention, we as a nation are doomed to

stagnation while others pass us by.

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That is why a culture of exploration, learning and stretching our horizons

is a vital ingredient of any dynamic society.

Of course, no-one knows what the inventions and innovations of

tomorrow will be.

Consider the following list of significant inventions, unknown at the turn

of the last century:

airport, antenna, anti-biotic, atomic bomb, computer, dvd, gene, internet,

laser, microwave, neutron, nuclear energy, penicillin, radio, video, virus. 1

And the list goes on.

And just as innovation, science and research rarely makes the front pages

of the newspapers, or the nightly news, the most important inventions and

innovations of today won’t make tomorrow’s front page either.

Rather, they’re being quietly developed in science labs and in sheds and

inside business and industry by individuals and companies striving to

improve the way things are done.

And even when these new inventions do reach reality, it’s likely that we

won’t notice their true significance for quite some time.

Consider for example the Internet, probably the most significant

invention of our time.

1 Adapted from Michael Crichton “Environmentalism as a religion”, Speech to the Commonwealth Club, San Francisco, CA, August 15 2003.

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According to my research, the first use of the term “internet” seems to

have been in the Washington Post on September 26, 1988, in the

Financial Pages, on page 30 - that is, almost the “classifieds” section. It

read:

“SMS Data Products Group Inc. in McLean (Va.) won a $1,005,048

contract from the Air Force to supply a defense data network Internet

protocol router”.

That was it. Nothing more.

A few months later there was another story, this time on the front page:

“a research network called Internet [note, no “the” before Internet]

which “links as many as 50,000 computers, allowing users to send a

variety of information to each other” was affected by a “virus.”2

No one at the time understood the significance of this new invention. Yet

20 years later it is the most ubiquitous and probably most significant

invention of the past 50 years at least.

All of which makes two clear points.

Firstly, the significance of an invention or new technology is often little,

if at all understood, at the time of invention.

2 As reported by Joel Achenbach in The China Post, 16 April 2008

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Indeed, the original purpose and the final successful use of the technology

often turn out to be very different. The internet was originally developed

by the United States Air Force to enable robust and “survivable”

communications within the US military and Government and as part of

the Cold War technology race with the USSR.

The inventors of the Internet, Lawrence Roberts and Leonard Kleinrock,

did not set out to create what we now know the Internet to be today.

The second, inescapable point about this example is that the Internet is

ultimately a development brought about by public funding - in this case,

started by the US Air Force and continued through various universities

and public institutions.

Yes, necessity is the mother of invention.

The Smith brothers of South Australia didn’t invent the Stump Jump

plough in the 1870s because they thought it would make them a quick

buck, they invented it because of the need to develop a plough which

would plough the mallee land they owned without constantly getting

stuck behind trees stumps situated just below ground level.

And they certainly didn’t have any Government assistance to bring the

invention into reality!

But other inventions and innovations are driven not by short-term

necessity but by a vision to improve the lot of others.

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These are inventions and innovations that probably wouldn’t exist if not

for assistance from the taxpayers’ purse. At the very least, this taxpayer

assistance has brought forward their development by many years, perhaps

decades.

The bionic ear is a case in point. In the late 1960s Professor Graeme

Clark’s pioneering research into the bionic ear at the University of

Melbourne was stalled through a lack of funding and a lack of belief it

was possible in the foreseeable future.

It took an Australian Government “public interest grant” to help bring the

bionic ear to commercial production.

And that is why, in the Opposition’s view, its critical that the Australian

Government play its part in supporting and fostering innovation and

invention, science and research in this country.

That’s why it’s critical that we put in place a regulatory and business

environment which allows business and industry to invest in research and

innovation with confidence in the future.

That’s why it’s critical that we properly fund our universities and our

higher research institutes such as the CSIRO and ANSTO.

And that’s why it is critical that we have a broad-based program in place

to support those projects that without a bit of tax-payer support mightn’t

quite make it over the high-jump bar.

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2. Labor’s failure to match their rhetoric with action

Before the last election, the Labor Party promised to do just this. The now

Minister, Senator Carr, and now Prime Minister, Mr Rudd, told anyone

who would listen that a Rudd Labor Government would invest heavily in

“innovation”.

Australia’s public and business investment in research and development

was, we were told, appalling.

And indeed, while Australian’s current Business Expenditure on R&D at

1.04 percent of GDP is the highest on record, it is still well behind the

OECD average of 1.53 percent.;3

And while Australia's Government Expenditure on R&D at 0.29 percent

of GDP is actually above the OECD average of .27 percent4;

It’s certainly true that there is more to be done in encouraging and

supporting innovation in Australia.

But what exactly has the Rudd Labor Government done since they were

elected nine months ago?

Well, they’ve set up an inquiry. Senator Carr and Mr Rudd spent two

years telling us what was wrong with our innovation and science system,

and how they had all the answers, but the first thing they do?

3 ABC Research and Experimental Development, ABS Cat No. 8104.0; Australian National Accounts, National Income, Expenditure and Product, ABS (5206.0). 4

Main Science and Technology Indicators various, ABC R&D Government and Private Non-Profit Organisations, various, Cat. No. 8109, Australian National Accounts: National Income, Expenditure and Product, ABS (5206.0).

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An inquiry!

But then, before that inquiry into the “National Innovation System”

reports, the Rudd Government acts on innovation anyway.

But in the exact opposite way to that which they promised.

Instead of investing, they cut. Instead of “revitalising”, they gutted.

As a result, the total percentage of Australian Government outlays on

R&D has actually fallen - form 2.63 percent last year to 2.56 percent this

year.5

The lowest in four years, and the second lowest level in the past decade.

Labor ripped $63.4 million out the CSIRO - an organisation which before

the election Labor had promised to “revitalise”.6

Meaning that over the forward Estimates, CSIRO now has $37.3 million

less than budgeted by the former Howard Government - without

factoring in the CPI.

Labor robbed $12 million plus from ANSTO - Australia’s only nuclear

science research facility. All because it had the name “nuclear” in the

title.

5 Australian Government 2008-09 Science and Innovation tables 6 Kim Carr “An innovation future for Australian industry”, election 2007 policy document, p. 9

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No, Mr Rudd. ANSTO is not a nuclear power station…

And worst of all, shamefully, Labor ripped $1.4 billion - $1.4 billion -

out of Australia’s innovation economy with the axing of the critical

Commercial Ready program.

A vital program which enabled the innovation sector to leverage public

capital into private venture capital on a $1 for $1 basis, bringing to

fruition projects critical for our future well-being which otherwise might

not have existed.

And might not now exist.

Yet, once again, before the election, Labor had promised to “revitalise”

the Commercial Ready scheme.7

They’d even promised to “streamline” the application process for

Commercial Ready.8

Well, Mr Rudd certainly did that!

And yet Rudd has the hide to tell us he has kept all his election promises.

3. The Coalition’s alternative

Let me be clear. Unlike Rudd Labor, the Coalition won’t say one thing in

Opposition and then do the exact opposite in Government.

7 Ibid, p. 13 8 Op Cit.

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Instead of over promising and undelivering like Labor, we - if anything -

under promised and over delivered.

When we say we recognise the importance of science and innovation for

Australia and for Australian industry, and the need to invest in the area,

we mean that a Coalition Government will actually invest in that space,

not cut in it.

We believe in a properly resourced CSIRO.

We believe in the need for a properly resourced nuclear science research

organisation.

And we believe in the need for a broad-based, Government support

program for innovation in the community.

And unlike the Rudd Labor Government, we don’t believe in picking

winners.

Like giving $35 million to one car company who you’ve taken a fancy to,

while not even telling the other two car companies, or any of the

component manufacturers, that the money is on the table.

Money, incidentally, which the car company didn’t seem to really know

what to do with, and which will, on the Government’s best-spin, be used

to help Australia assemble a car with technology that is ten-years old,

while the rest of the world gets generation two hybrid technology…but I

digress.

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Or like axing a broad-based innovation support program and replacing it

with your own pet, narrowly focussed programs.

When challenged over his axing of the Commercial Ready program,

Senator Carr is fond of saying that a raft of new programs he has

introduced will do the job instead.

(which of course confirms another point - the budget cuts were not about

fighting inflation, they were actually about finding the money for Labor’s

extravagant election promises. But that’s another matter).

But what exactly has Labor established with the money from the

Commercial Ready program?

Well, firstly there’s the so-called Enterprise Connect network, which not

even Senator Carr really seems to know what it does.

From what’s he’s said to date, it seems like nothing more than a $250

million business advisory service.

Now, how is that going to assist innovative businesses to leverage crucial

venture capital for their innovations?

And then of course there’s Senator Carr’s so-called Clean Business

Australia Fund.

But what is that? Well, it’s a “re-tooling for climate change” fund, a

“green building” fund, and a “climate ready” fund.

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Get the picture. A very narrowly focussed application of public monies

for innovation.

Don’t get me wrong. Investment in research and innovation in the climate

change area is crucial for our nation’s future.

But how exactly is medical company Sienna, who were to have received

a Commercial Ready grant for a new anti-cancer drug, going to access

climate change grants?

Or Vigil Systems, who were developing a high-tech product to reduce

driver fatalities?

Or Structural Monitoring Systems, who were developing a structural

health diagnostic tool for jumbo jets?

Of course, they can’t.

The Opposition believes that Government support for business R&D

should be as broadly available as possible, and not focussed on narrow,

specific areas.

The Commercial Ready program fitted that bill well. Could it have been

improved? Of course it could.

But should it have been axed? - No!

And not even Senator Carr thought so before the election.

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A Coalition Government will ensure there is a broad-based innovation

support program in place, and we will ensure our public research agencies

are properly funded, not gutted.

Innovation and invention is our future.

It is not something to be tampered with on a whim in order to fund other

priorities.

As we all know, the promise to re-institute funding in the next budget is

no way to do business. You can't turn the R&D tap on and off at will

without their being a huge crisis of confidence in the sector.

Conclusion

But I think that’s enough from me.

The bottom line is, you can be assured that the Opposition understands

the importance of R&D to the future of Australia, and importantly, to the

future of Australian industry and businesses.

I have tonight set out a few broad principles which will guide me as I

work towards preparing detailed Opposition policy for the next Federal

election.

But there is much to be fleshed out.

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A few months ago I was telling people that when it came to Opposition

policy I was a blank whiteboard waiting to be written on.

Well, now I’m a whiteboard with a few broad headings.

So it’s over to you for questions and ideas. I’m all ears.

Thank you.