Hawker Britton Occasional Papers and Media

National Innovation Review

September 2008

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The Minister for Innovation, Industry, Science and Research, Senator the Hon Kim Carr, today released Venturous Australia; the report on outcomes of the Review of Australia’s National Innovation System.

The Review was conducted by a panel of experts and was chaired by Dr Terry Cutler.  A copy of the report is available here.  Comments on the Review can be made until 23 September 2008.  The Federal Government will consider the recommendations put forward in the report, and will respond by the end of 2008.*

As Senator Carr said today in releasing this report:

The Rudd Government believes that innovation is critical to Australia's future as a strong, prosperous and equitable nation. This Review represents a vital first step in harnessing the potential of innovation and putting it to work for the benefit of all Australians.  The Review provides an honest appraisal of Australia’s innovation effort and concludes that while our global competitors have been increasing their innovation efforts, our performance has been falling.  If we are serious about unlocking Australia’s innovation potential, we all have to lift our game.

Key recommendations fall under the following headings:

Taxation

Recommendation 8.2–The R&D Tax Concession be changed from a tax deduction to a tax credit.  The existing R&D Tax Concession (the 125 percent R&D Tax Concession, the 175 percent Premium, the R&D Tax Offset and the International Premium) should be replaced with a Tax Credit in order to raise the level of business expenditure on research and development by providing a less complex and more predictable support mechanism. A 40 percent Tax Credit should be available to large firms with a refundable Tax Credit of 50 percent available to smaller firms with turnover under $50 million. All R&D undertaken in Australia which meets relevant definitions be eligible for the tax credit.

Recommendation 8.6 –R&D expenditure undertaken in Australia by foreign-owned firms be eligible for the 40 percent Tax Credit but excluded from the refundable Tax Credit.

Innovation Grants

Recommendation 3.2 –Extend the Enterprise Connect Program to include services firms. 

Recommendation 5.3 –Establish a program to encourage and support professional bodies (working with educational institutions and State and Territory Governments as appropriate) to provide accelerated pathways to facilitate enriching professional transitions so as to make Australia a world leader in this area.

Recommendation 7.1 –The Australian Government should experiment with the use of prizes to stimulate innovation. Funding should be modest – say $5 million over two years with an external evaluation after three years.

Recommendation 9.1 –A Competitive Innovation Grants Program should be introduced to assist innovative firms, with limited access to capital, in the high risk, proof-of-concept and development stages. This program would be targeted at projects addressing identified national priorities for innovation. Successful firms would be required to repay grants from the royalties or earning streams accruing from commercial success. The program would seek to assist 200 innovative firms annually at a cost of $150 million per year.

Recommendation 9.2 –The COMET program be expanded and continued for another five years. 
Recommendation 9.3 –A portfolio of collaboration and linkage programs be maintained to support productive partnerships in the National Innovation System and with partners globally.

Recommendation 9.4 –The recommendations in the Review of the CRC Program Collaborating to a Purpose should be acted on immediately.

Recommendation 9.5 –A pilot linkage voucher scheme be introduced via the existing Enterprise Connect and COMET program to improve innovation linkages between small and medium sized enterprises and the research community. Each voucher would be worth up to $15,000 and would be used to fund collaboration between small firms and public sector research organisations. The program would link 5,000 firms per year to public research agencies at a cost of $50-$75 million per year.

Recommendation 9.8 –The Innovation Investment Fund program be maintained, with a fourth round implemented after 2012. Ten new funds over five years to be established at a cost of $300 million over 15 years.

Recommendation 9.9 –The Australian Government immediately establish a second round of Pre-Seed Funds. Four new funds should be established at a cost of $100 million over 15 years.

Government Procurement

Recommendation 10.6 –The Australian Government should recognise its role as an active participant in facilitating innovation through procurement practices. In this context, the Government should:

University Research

Recommendation 6.1 –Adopt the principle of fully funding the costs of university research activities and implement through adjustments in funding to block and competitive grant schemes, without compromising grant success rates.

Recommendation 6.2 –Base the distribution of research block funding to universities on success in winning national competitive grants and on evidence of excellence in research, such as the research quality rankings to be produced by the Excellence in Research for Australia initiative.

Recommendation 6.3 –Develop a strategy to support the strengthening of publicly funded research agencies (PFRAs) within the National Innovation System over time, including urgent restoration of funding levels.

Recommendation 6.4 –In the short term, increase funding both for the PFRAs and the university research system to at least match the proportion of GDP that was allocated to them in the mid 1990s.

Recommendation 6.5 –To build concentrations of excellence, encourage collaboration and achieve better dissemination of knowledge, introduce additional funding support for university and other research institutions to partner with each other and with other research organisations (national and international).

Recommendation 6.7 –Australia should enhance its capacity to engage internationally by opening up current innovation granting programs to international partners and participants.

Recommendation 6.8 –The NHMRC should be resourced to deliver incentives designed to rationalise and consolidate Australia’s health and medical research sector, including universities and independent medical research institutes, to achieve efficiency and effectiveness of the sector.

Recommendation 6.11 –The APA annual student stipend should be raised to at least match the current APA(I) stipend of around $25,000 — and then indexed by average earnings; at the same time, the length of support provided under an APA should be increased to 4 years.

Recommendation 6.13 –Establish a National Research Infrastructure Committee to advise on strategic directions in funding of national research infrastructure including landmark infrastructure.

Recommendation 6.14 –To ensure a sustainable research infrastructure strategy into the future, extend funding for a successor program to the National Collaborative Research Infrastructure Scheme (NCRIS) for 10 years including capital and operational support of $150 to $200 million per annum.

Intellectual Property

Recommendation 7.2 –Patent law should be reviewed to ensure that the inventive steps required to qualify for patents are considerable, and that the resulting patents are well defined, so as to minimise litigation and maximise the scope for subsequent innovators.

National Information Strategy

Recommendation 7.7 –Australia should establish a National Information Strategy to optimise the flow of information in the Australian economy.  The fundamental aim of a National Information Strategy should be to utilise the principles of targeted transparency and the development of auditable standards to maximise the flow of information in private markets about product quality.  Furthermore it should maximise the flow of government generated information, research, and content for the benefit of users (including private sector resellers of information).
Recommendation 7.8 –Australian governments should adopt international standards of open publishing as far as possible. Material released for public information by Australian governments should be released under a creative commons licence.

Governance

Recommendation 10.3 –An Advocate for Government Innovation should be established to promote innovation in the public sector. Further details about the role of this Advocate are included in the report.

Recommendation 12.1 –The Prime Minister’s Science, Engineering and Innovation Council should be replaced by a new National Innovation Council, chaired by the Prime Minister, and supported by a small but high level Office of Innovation. An International Innovation Advisory Panel would be formed to provide advice to the Council on international engagement.

Recommendation 12.2 –To more effectively coordinate the innovation activities of public sector research agencies and to provide a source of co-ordinated advice to the National Innovation Council, a Research Coordination Council should be established.

Recommendation 12.8 –That common metrics, performance indicators and mechanisms for collecting and sharing data be developed and adopted by all jurisdictions.

Recommendation 12.9 –That governments together develop a single mechanism (such as a web portal) for providing information to clients about access to the full range of Australian and State and Territory government innovation programs.

Recommendation 12.11 –An Annual Statement on Innovation should be prepared by the National Innovation Council and incorporate a clear set of framework indicators. (An initial proposal for these indicators is set out in Annex 12).

Recommendation 12.13 –A National Centre for Innovation Research should be established to advance knowledge of the innovation system through high quality, independent research which is strongly relevant to policy and practice.

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