Prosperity through innovation

Innovation and Science Australia (ISA) releases report: Australia 2030 - Prosperity through Innovation

Improve government support for R&D to reverse the decline in BERD and enhance financial support through the Export Market Development Grant program

Innovation and Science Australia has released the 2030 Strategic Plan for innovation in Australia.  Comprising a total of 30 recommendations the report details five “imperatives for action” related to education, industry, government, R&D and culture and ambition.


The focus, detailed in the report is to develop national industry policies out to 2030 that recognise that “innovation will be integral to the expansion of Australia’s economy, keeping its workforce strong, and addressing societal challenges”. ISA Chairman Bill Ferris says that Australia is in a “global innovation race” with opportunities for “global wealth, better jobs, and the best access to the products of innovation”.


In the report it is recognised that Australia lags behind the rest of the work in terms of investing in innovation that delivers new-to-world outcomes.


Australian jobs and prosperity grow as a result of new industry R&D investment, new-to-world innovation, a stronger base of high-growth firms and exports, and greater competition and productivity


What a perfect opportunity to enhance existing and introduce new targeted and broad-based tax incentives and grant funding programs.


Offering stimulus to high-growth firms and improving productivity across industry is one piece of the puzzle.  Arresting the slide in business expenditure on R&D is another.  The R&D Tax Incentive is a key component in boosting innovation and generating new knowledge with the ISA report suggesting that policy initiatives need to be introduced that ultimately result in R&D spend by business increasing.  Since 2008, when business expenditure on R&D was 1.4% of GDP, the trend has been downward.  The ISA Report recommends that the R&D Tax Incentive should be more targeted, more likely toward the SME space to increase business spend from the current level of 1% to 1.7% of GDP.  This is still below the OECD average.


How a targeted approach to increasing R&D spend will look, is yet to be determined but what is both interesting and alarming is the ISA’s report concluding that the recommendations of the 2016 Review of the R&D Tax Incentive essentially be adopted with further beneficial changes in terms of the refundable cap (up from $2 million to $4 million pa capped at a total of $40 million) and lowering the intensity threshold (from 2% to 1%).  Whilst commendable, for business the overall effect of the recommendations will still create a bias in terms of who can claim the R&D Tax Incentive and what activities and what expenditures qualify for R&D.


Increasing support for direct grant programs that target national priorities recognises that Australia does have pockets where comparative and strategic global advantage does exist.  Rightfully these sectors should be incentivised.  However there also exists a range of other sectors outside of the “growth sectors” that should not be forgotten, especially where to do so would compromise economic growth through such impacts as increasing imports, eroding intellectual capital and know-how and having Australian jobs offshored.


The ISA Report also recognises the growth of export firms and concludes that the current Export Market Development Grant program should attract increased funding, especially given the number of free trade agreements with foreign countries.  This is commendable.


Each of the proposed initiatives will require government to become a catalyst for innovation and knowledge creation, not a road block.  This will require a mature approach to tax incentives, grant funding and financial assistance and other in-kind government contributions to business at all levels and across all industries where potential for growth exists.