Why the government needs to invest more in Australian innovation … or perish

Last week’s AFR Innovation Summit raised a number of challenges Australia is facing. These challenges remained without solutions.

Conflicting views seemed to run counter to what the long-term view should be: how Australia plans for future prosperity, what we need to do today to ensure that we will have jobs tomorrow, defining a positive role for AI, and supporting innovation in software and technology. What’s at stake here is a relevant future for the Australian economy and a diversity of companies in sufficient numbers that create the greatest benefit over the longest term.

Our collective intent seems confused. The government should be inspiring and supporting the investment made every week, by companies like Digivizer, in product research and development, market development, export development and growth, so that we develop world-class products that create export wealth for Australia.

We have invested millions of dollars in product research and development — not on esoteric experiments that meet subjective measurements of proof of some sort of “pure” R&D, but on R&D that confirms new ways to create business value. For our part, we continue to research, develop, test, apply, learn and iterate to create something commercially viable.   

Companies that grow through continuous development, which are able to separate what generates revenue today from investment in what generates revenue tomorrow, should be applauded and incentivised — especially those with track records of taking previous years’ R&D and apply it to future revenues.

We will only stay relevant and valuable if we continue to devote a good percentage of our time working out what will be important in the future. Yet speakers at this week’s conference opined that what companies like Digivizer do is somehow “not real R&D”. Certainly, the government’s policy now seems clear: to return savings from a cornerstone program back to the government, regardless of the fact that a number of speakers quoted figures showing how low Australia sits in the global innovation stakes. Let’s not forget that today’s R&D support in Australia is for many a forward tax rebate against investments already made, involving many hundreds of hours of self-assessment, often subject to seemingly subjective assessment, diverting energy and focus away from where it really counts: actual innovation.

It is a great disappointment that our government’s rhetoric is now focused on savings rather than on investment  for the future.

As CSIRO CEO Larry Marshall said, you can’t save your way to success.

Or, as Daniel Petre of AirTree Ventures phrased it: “The government shouldn’t f— up the R&D tax incentive — it’s critical for start-ups and critical then for founders to retain equity.”

Meanwhile, countries such as Sweden, Israel and Germany redeploy up to 100% of the savings from earlier R&D schemes into direct R&D grants.

Australia runs the risk of being an innovation backwater. Figures from the conference cite a drop in Australia’s gross R&D expenditure as a percentage of GDP from about 2.25% to about 1.9% between 2007 and 2015. The OECD’s figures grew from about 2.3% to nearly 2.4%. The World Intellectual Property Organisation puts Australia at 17th in our region, behind Hong Kong, Singapore and South Korea.

For a nation with just 0.33% of the world’s population, we need to do better at going global. The government needs to create certainty, clarity and consistency with a focus on future global relevance, and then do all it can to allow businesses to flourish. By all means demand rigour, but don’t confuse forcing companies to jump through an endless procession of hoops with innovation.

We need to prove we are building a nation that supports innovative businesses with something new to offer. We need to support these businesses in their critical growth stages, to ensure they will continue to make a positive difference.

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