This opinion article by Tim Reed, chief executive of MYOB and chairman of the Business Council Innovation Task Force, was published by Business Insider on January 18.
When Malcolm Turnbull launched the National Innovation and Science Agenda in December 2015, the atmosphere was one of energy and optimism. The focus was on harnessing the drivers of innovation: new ideas from Australian research and development, new processes and products to meet consumer needs, and business models to make the most of our increasingly digital world.
While much of NISA has been accomplished since, the conversation it tried to inspire about innovation underpinning the future of the Australian economy was lost in the federal election debate and a growing uncertainty about the volatile world around us.
The focus of the debate shifted to the threat of innovation, and away from the benefits and the impact on our prosperity.
In 2017, we must reinvigorate the conversation about a more innovative Australian economy. The 2016 Australian Innovation System Report could not be clearer: innovative businesses create jobs, make a greater social contribution, are more productive and offer consumers greater choice.
For the many economies worldwide struggling with flat productivity growth, sluggish trade and ageing populations, becoming a globally competitive, innovative economy is the answer. The global innovation league is the code we are competing in and we are slipping down the ladder.
Australia was ranked 19th on the 2016 Global Innovation Index, behind New Zealand, Britain, the United States, Canada, Finland, Germany and Singapore. It’s not a performance reflecting our capabilities or potential.
2017 must be the year we go hard on the settings that will enable us to compete.
Essential to our ability to drive innovation is the education sector, not just from the perspective of how our students rate in the world but also how our graduates and researchers make the most of opportunities in industry. The level of collaboration between the research community and industry is an area where we perform poorly on international measures. We all agree that we must do better together. In 2017, the Government is trialling new measures and incentives to improve collaboration. We need a strong consensus from that trial that we’ve got the system to do better.
Also essential to a globally competitive economy is our regulatory and tax environment. In a global league our local rules must support the efforts of business to invest in R&D, and to attract the capital that we need in our economy to translate good ideas into global ideas.
Resolving the R&D Tax Incentive policy is one of the most important decisions for the Government in 2017.
Other countries are seeking to lure R&D investment into their economy. The R&D Incentive is one of the most important levers Government has to attract and retain R&D activity in Australia.
In 2016 an eminent panel made recommendations to Government that balance our pressing need to retain R&D in Australia, with our budgetary need to ration access to the incentive and manage the complexity of the system. The recommendation to increase the R&D cap to $200 million will motivate companies to expand their R&D activities here, employing more Australians. Other measures, including an intensity test, require careful thought to ensure we do not unintentionally discriminate against sectors of the economy.
Finally, in 2017 we need a firm and final decision on policy settings.
In the global innovation league the competition is playing a long game. Competing countries look to establish policy environments and budget measures for the next 5-10 years. To establish the conditions for private firms to invest in a long game here means policy stability, with explicit bi-partisan support for policy measures that will benefit generations of Australians.
Much has been achieved under Minister Hunt in implementing NISA, including a thorough assessment of our performance, new incentives to attract investment in innovation, and a critical look at the role of government procurement in fostering new ideas.
These are the building blocks underpinning the conversation we need about innovation. This is our opportunity to embrace the vision of an innovative Australian economy as fundamental to our national prosperity. A prosperous, dynamic economy will create opportunities for Australians, if we also establish the policy settings to support people re-skilling for the jobs of the future.
So we must back political leaders who are working to reinvigorate the innovation agenda.
The most important step is consensus that we need to encourage innovation in our economy, not to fear it. The alternative is a less competitive and poorer Australia, with fewer opportunities for Australians.
Tim Reed is chief executive of MYOB and chairman of the Business Council of Australia’s Innovation Task Force.