Ambitious Australia joins a long line of reports stretching back to the Hawke-Keating era in the 1980s and 1990s, when public spending on science, research and innovation gained a substantial boost.<\/p>\n
By the end of the 1990s, the fastest-growing component of Australia\u2019s export mix was high-value, complex, finished products. Correspondingly, Australia\u2019s rate of productivity growth<\/a> was running well above the OECD<\/a> average.<\/p>\n We are now in a very different world. As this new report shows, Australia has fallen behind its peers on many fronts.<\/p>\n Diagnosing the problem<\/p>\n If the report did nothing other than highlight how fragile Australia\u2019s hard-won prosperity is, it would still have performed a valuable service. And on this point, it does not hold back.<\/p>\n The report<\/a> notes Australia\u2019s manufacturing as a share of gross domestic product (GDP) is the lowest among developed economies in the OECD.<\/p>\n Australia also has among the lowest share of spending on research and development in the OECD at 1.69% in 2023\u201324. This is from a peak of 2.24% of GDP in 2008-09.<\/p>\n And between 2010 and 2020<\/a>, Australia\u2019s productivity growth was the weakest it had been in six decades.<\/p>\n Of course, correlation is not causation. But in most countries, manufacturing is where businesses make the biggest commitment to research and development. It is hardly surprising that as manufacturing has declined, so, too, has spending on innovation.<\/p>\n Rethinking our reliance on resources<\/p>\n The economic concept of \u201ccomparative advantage<\/a>\u201d suggests a country should specialise in producing the things it can with a lower opportunity cost than its trading partners.<\/p>\n The problem is that in pursuit of comparative advantage, successive federal governments have allowed Australia\u2019s resources exports \u2013 such as iron ore and coal \u2013 to crowd out high-value manufacturing.<\/p>\n The task of this review was twofold.<\/p>\n First, it had to think through the reconstruction of our entire research and innovation system. This includes neglected \u2018blue sky\u2019 research, which doesn\u2019t have immediate practical use, but which has led to world-changing inventions.<\/p>\n For instance, work on black hole mathematics<\/a> played a key part in the invention of WiFi<\/a> at CSIRO.<\/p>\n Second, it had to ensure the system was \u2018fit for purpose\u2019 as part of broader industrial policy to build new areas of competitive advantage in global markets and value chains.<\/p>\n The report\u2019s recommendations<\/p>\n After a lengthy consultation process, the report proposes a comprehensive \u201cplan for action<\/a>\u201d, with 20 recommendations, including:<\/p>\n better support for foundational researchconsolidation of fragmented research and innovation programschanges in the incentive structure for business research and developmentimproved startup and early-stage financingembedding research and development in public procurement.<\/p>\n Echoing previous reviews, Ambitious Australia also called on the federal government to establish a new national innovation council. This body would set priorities and coordinate efforts to meet goals across six national innovation \u2018pillars\u2019 in:<\/p>\n health and medicalagriculture and fooddefenceenvironment and energyresourcestechnology.<\/p>\n Overall, the idea is to promote more efficient teamwork across these pillars between government, business, investors and researchers on \u2018high-risk, high-impact\u2019 challenges.<\/p>\n What could work better<\/p>\n The problem with this approach is that while the motivation is sound, the bureaucratic complexity of the new structure may prove a drawback. This is especially the case when it comes to getting industry involved.<\/p>\n As a number of submissions, including one<\/a> from the Business Council of Australia, suggested, Australia should be following the lead of countries like Germany<\/a>, the UK<\/a> and US<\/a>, which have built a network of collaborative research and innovation hubs in specific locations.<\/p>\n For instance, the UK Catapult centres<\/a> bring together some of the UK\u2019s top businesses, scientists, technical specialists and engineers to work side by side. In doing so, they bridge the gap between research and industry.<\/p>\n This is not a new idea. About 30 years ago, then-Prime Minister Paul Keating\u2019s \u201cInnovate Australia<\/a>\u201d policy statement favoured a similar model, with the CSIRO and universities as an engine for industrial transformation.<\/p>\n However, as with so many policy statements and reports, it became a casualty of a change of government. The Rudd-Gillard government\u2019s Venturous Australia<\/a> report suffered a similar fate.<\/p>\n Gaps to be filled<\/p>\n The recommendations in the report are mostly compelling. But there are still some significant gaps.<\/p>\n For example, the report offered no view on whether the current research and development tax incentive<\/a> represented better value for taxpayer money than direct targeted funding.<\/p>\n Nor did it address the crucial role of management in improving productivity by engaging with workforces and building their capacity to adopt and adapt to new technology, such as embodied artificial intelligence in manufacturing.<\/p>\n And then there\u2019s Australia\u2019s regions. These can play a vital part in the research and innovation system because they address the related challenges of energy transition and economic diversification.<\/p>\n A separate report<\/a> on the government\u2019s Energy Industry Jobs Plan goes some way to filling this gap.<\/p>\n What\u2019s next<\/p>\n Ambitious Australia outlines many recommendations whose time has surely come \u2013 especially given the federal government\u2019s vision<\/a> for a \u201cFuture Made in Australia<\/a>\u201d.<\/p>\n The challenge now is to work through the report in the lead-up to the 2027 federal budget and beyond. We must also ensure strategic intent is matched by transformative actions.<\/p>\n The Conversation<\/p>\n Roy Green<\/a>, Emeritus Professor of Innovation, University of Technology Sydney<\/a>. This article is republished from The Conversation<\/a> under a Creative Commons license. Read the original article<\/a>.<\/p>\n Firstlinks is a Morningstar company. If you\u2019d like to join the conversation and contribute your thoughts, you can leave a comment on the original article here.<\/a><\/p>\n