National Press Club

NATIONAL PRESS CLUB ADDRESS
NATIONAL CIRCUIT, CANBERRA, ACT
TUESDAY, 8 DECEMBER 2015

INTRODUCTION

Thank you for inviting me to address the National Press Club today. It is always a pleasure to be here.

It’s especially so at a time like this. I could say there’s never been a more exciting time.

I am here to talk about the Government’s National Innovation and Science Agenda, that the Prime Minister and I launched yesterday.

It’s an exciting and ambitious agenda that I’m very enthusiastic about making a reality.

It is designed to set Australia up to succeed in a changing world.

A world where the things that make nations prosperous, and create rewarding work and fulfilling careers for individuals are the results of education and research.

These are then transformed into products and services that create new jobs and business opportunities.

We all know what we want for Australia: economic growth, jobs, opportunities for people with ideas, and greater chances for people willing to give it a go.

The last two decades of unabated growth demonstrate Australians are determined to have all this.

Because we worked out our strengths, identified our resources and marketed them to the world we succeeded for a long time.

But times are changing, and changing fast - the creation of low cost, high capacity computing power and the infinite resource that is the Internet have seen to that.

And now the data revolution is upon us. Industries are combining data and information to both boost productivity and create entirely new business models for Australian industry.

There are automated mines in the Pilbara.

Graziers now know which rams to breed when and where, thanks to a national real-time database.

Australian doctors are drilling down into our genes and DNA to identify the source of cancer.

And Australian researchers are leading the race to create quantum computing – a technology with the potential to vastly outstrip our current computing capabilities.

We need to embrace that change. We’ve got a history of solving problems, coming up with bright ideas, and facing a challenge.

BENEFITS OF INNOVATION IN AUSTRALIA

Innovation can be a word thrown around too cheaply, but if used properly it is the tool that lets Australia thrive in this new environment.

Innovation creates new products, new businesses, new markets, and the new jobs Australia needs.

Consultants PriceWaterhouse-Coopers estimate an innovation focussed Australian economy has the potential to add $37 billion to our GDP in 2024 and as much as $136 billion in 2034.

That includes creating more than 540,000 jobs.

Data from the latest Innovation System Report also speaks volumes. It shows that despite representing less than half of all employing businesses in the economy in 2011–12, innovative businesses accounted for around 70 per cent of total employment.

They accounted for 70 per cent of total capital expenditure and total business income, and more than 80 per cent of total Internet income.

Innovative businesses in Australia are twice as likely to export, increase productivity, employment and training, and five times more likely to increase their number of export markets.

Typically, start-up firms also pioneer business model innovation, and are more likely than older businesses to use research, science, IT and marketing skills in their day-to-day activities.

And, of course, with Innovation goes science. They are two sides of the same coin.

Science and research underpin our ideas and our innovation. Whether discovering a new use for an old product, or building a brand new solution to an age old problem; they are indispensable.

Entrepreneurs willing to take a risk, and the investors willing to back them, take those ideas to market - creating new businesses, products, services and jobs.

THE CHALLENGE

For the last two decades we have lived on the dividends of successive economic reforms and demand from growing Asian economies.

A major proportion of Australia’s growth per capita came from improvements in our use of labour, capital and technology.

Manufacturing, while it remains significant, slipped in terms of GDP and employment share, largely under pressure from emerging economies like China and, increasingly, India.

We are coming to the end of the mining investment boom and new sources of growth are needed.

We are not alone in this. All developed economies face similar structural challenges. Some are doing a good job of meeting them.

Some are performing spectacularly by transforming their economies to meet new patterns of demand for goods and services

Australia’s performance among these leading economies is, at best, mixed.

We do well on some measures of innovation – such as the quality of our research, which is excellent.

Other strengths are the rapid growth in the education level of the workforce.

In 2012-13, over 40 per cent of Australian businesses engaged in innovative activities.

But only 9 per cent of Australian small and medium businesses brought a new idea to market in 2012-13 compared to 19 per cent in the top 5 OECD countries.

On research-business collaboration, we rank 33rd out of 33 OECD countries for the number of large companies collaborating with higher education or public research agencies.

We’re got the will, we’ve got the ideas: we need innovation to get the ideas to market and to create the jobs and growth we need.

THE AGENDA

This problem is what the National Innovation and Science Agenda sets out to address.

It is a set of measures that will make us a more innovative economy.

With measures totalling over $1 billion it draws up an agenda for building on our past and making things even brighter in the future. It lays out a series of initiatives and directions to shift our focus onto innovation.

It will involve everybody already in our innovation culture - inventors and entrepreneurs, scientists and industry strategists, men and women working in research labs and universities, business start-ups, farms and on our factory floors.

But I also want the Agenda to speak to many more Australians because it is based on a great Australian tradition – being game to have a go.

How we do this is not dare I say it, rocket science.

It comes down to one thing that holds the key for a successful society and economy: constantly striving to do things better.

In large part this is about creating a culture that accepts change as the new normal, that backs ideas and respects innovators and entrepreneurs, whether they succeed or fail.

It is about using research to refine and develop ideas, funding them with private and public money, facilitating unusual but promising businesses, engaging our best thinkers and investigators and inspiring more clever, cluey investors, large and small, to back what look at first glance like bolters.

In the end, this is about taking ideas to market so that Australians get jobs and families put food on the table.

The Prime Minister has, with the National Innovation and Science Agenda, put innovation at the very heart of the Government's economic agenda.

To help understand the Agenda, I’ve broken it into four themes. I’ll run through those now, and the key measures therein.

CULTURE AND CAPITAL

The availability of finance, as well as encouraging a more entrepreneurial mindset, form the first key theme of the agenda – Culture and Capital.

Changes to our tax and business laws to encourage entrepreneurship and innovation are vital.

I want to unlock the capital of investors and give entrepreneurs a chance to raise the money they need to get an idea off the ground.

Often, people with a great idea battle to turn it into a great business because they struggle to access cash when they need it most.

We want to give all Australians the opportunity to develop a new idea, but importantly we want to give all Australians the chance to spot a good idea, invest in it, and profit from it.

We’ll offer a 20 per cent income tax offset on investments in innovative businesses, as well as a ten year exemption on capital gains tax on those investments.

We’ll boost early stage venture capital limited partnerships, doubling the fund size cap to $200 million and giving partners in new funds a 10 per cent non-refundable tax offset on capital invested.

This will unlock funds and investment to help turn great ideas into reality.

And we will give start-ups the chance to bring in equity partners and secure new business opportunities without losing access to their tax losses.

We will also relax some of the strict insolvency provisions to remove the sanctions and stigma from entrepreneurs who ‘have a go’, whilst looking at further opportunities for reform in this important area.

Employee share schemes give new businesses the ability to hire world-class staff by giving them a stake in the company, rather than a higher wage – something hard to do when just starting out.

These employees now have a stake in the business, and are more committed than ever to its success. We’ll make it easier for small companies to do this.

And mechanisms for crowd-sourced equity funding will also stimulate opportunities for innovators, making it easier for everyone to invest in a good idea.

Through our Incubator Support Programme we will boost coaching and support for innovative startups with over $10 million in funding to help them turn their ideas into new products or services.

This will help new businesses all over Australia, with a focus on regions and sectors with high potential for innovation.

All this sits within the context of our three historic free trade agreements, now signed with China, Japan and Korea, and the now-concluded Trans-Pacific Partnership, unlocking new markets for Australian businesses.

Two weeks ago, Bill Ferris, the Chair of Innovation Australia warned we are losing out on the benefits from our excellent research in health and medicine.

Our Medical Research Future Fund is a major initiative to deliver increased funding for health and medical research. But it won’t invest in late stage transition of that research to market.

So we’ve created a new $250 million Biomedical Translation Fund that will increase the capital available for commercialising medical research sooner – without affecting the Medical Research Future Fund’s ability to reach its target of a balance of $20 billion by 2019-20.

Similarly, our new $200 million CSIRO Innovation Fund will boost outcomes from it and other publicly funded research institutions by co-investing in spin-off companies and high-potential start-ups.

We’ll help the best of our scientists and innovators get their products to market.

We’re encouraging Australians with a new idea to have a go, and making it easier for them to get the money they need to do that.

COLLABORATION

The second theme of the agenda is Collaboration.

This financial year Australian government investment in science, research and innovation will be $9.7 billion - serious money and an above OECD average proportion of GDP.

We’re spending a lot, but we’ve got to spend it better.

That’s why the Government is shifting the focus of research funding to ensure that collaboration between our universities and our businesses is prioritised. This is a transformational change in the way our universities do business.

New arrangements, based on the review of Dr Ian Watt, will streamline and refocus a greater proportion of research block grant funding toward collaboration.

There will still be scope for ‘blue sky’ research, without immediate apparent commercial benefit, but no longer will publications be a key metric in how we fund that research.

To do that, we will introduce clear and transparent methods to measure engagement with industry. It won’t be easy, but through collaboration and consultation we’ll be able to see which of our universities are delivering against these benchmarks.

We are also providing long-term, predictable and sustainable funding for our critical research infrastructure. The Synchrotron, the Square Kilometre Array and the National Collaborative Research Infrastructure Scheme will have $2.3 billion of funding set aside over the next decade.

This stable funding will allow these facilities to plan for the future and, critically, allow them to engage with the business community, encouraging greater collaboration.

I will also be asking the new Chief Scientist, Dr Alan Finkel, to identify what specific pieces of critical research infrastructure will be required into the future.

The highly successful Research Connections initiative, part of the Entrepreneurs’ Programme, will be expanded into Innovation Connections and the Australian Research Council Linkage Projects will be opened to fast-tracked continuous applications on collaborative research grants.

We will also open a new application round for the Cooperative Research Centre Programme in February.

These three programmes will support businesses bringing researchers and scientists on board, increasing collaboration and providing them with the expertise they need.

The Film Tax Offset will be reviewed, making sure we best focus it to encourage the production of feature films here in Australia and boost jobs in our creative industries.

The Government’s Innovation and Science Agenda is transformative and has an economy wide impact, but it would be an enormous mistake to assume that an innovative Australia can look inward.

So we will support Australian businesses and researchers wanting to collaborate on innovation and science internationally, and look to our trading partners for ideas and opportunities through our $36 million Global Innovation Strategy.

This will feature five ‘landing-pads’ in global innovation hotspots, to support Australians travelling to these locations to start a new business.

The first of these will be in Tel Aviv, where I will visit next week; the second in Silicon Valley.

Organisations like Advance are already doing great work in linking together Australians living overseas, and this will complement and work with those efforts.

We will establish strategic collaboration projects with key economies, including world leaders in innovation and the science and entrepreneurship that underpin it.

But we won’t get anywhere without the right people – talented, skilled, educated, knowledgeable people who are encouraged to take risks with big ideas and to enlist entrepreneurs.

TALENT AND SKILLS

That’s why the third theme of the agenda is Talent and Skills.

The Government will continue to invest in the talents and skills of those coming through our schools, TAFEs and universities.

Our kids are as smart as any in the world, our teachers as committed, and our schools and universities just as good.

But the pace of technological change means more demand than ever before for people with the skills needed for high wage, high productivity jobs.

Our students need the basics, but crucially now they need science, technology, engineering and mathematics subjects; as well as coding and computational thinking so they’ve got the critical reasoning skills to adapt to the future.

This is why we will continue to back our national science, technology, engineering and mathematics in schools strategy to nurture a passion for science and innovation in our children.

To boost that further we will invest over $40 million to stimulate interest in science, technology, engineering and maths among students from the earliest ages right through their school careers.

We will invest over $50 million in equipping our young people with the skills they need to embrace the digital age.

All Year 5 and 7 students in Australia will have the opportunity to learn coding through online computing challenges, building on the work we’ve already done to fund coding in primary schools.

The pace of change in technology is so fast that we need to make sure our teachers, the engine room of our education system, are kept up to speed.

That’s why we’ll support our teachers as they implement the Digital Technologies Curriculum, upskilling them through online learning activities, expert help, and partnerships to bring scientists and computing professionals right into our classrooms; helping all students to get the most out of this world class curriculum.

We will also invest $12 million in expanding opportunities for women in science, technology, engineering and maths –encouraging them to both study and work in these areas.

The number of girls enrolled in mathematics and science subjects after year 10 has been decreasing since 2001.

At the university level, women are still significantly underrepresented in IT and engineering courses.

Think for a moment of all that wasted potential. I want young women to feel excited about computer science, keen to learn advanced mathematics, and not intimidated to study and make a career in these areas.

Adding to all this, we will entice the world’s best to come to Australia to start their business.

We will introduce new visa arrangements for entrepreneurs, targeting the most talented and smoothing pathways to permanent residency for high quality STEM and ICT graduates.

Of course, these are all initiatives the government will implement on the basis of what we know now. But we must do more to prepare for the world to come.

And so we will cement Australia as a leader in quantum computing.

We are already at the forefront here, and now is the time to back our success, invest the money and see some results.

The Government will invest over $26 million to translate the Centre for Quantum Computation and Communications Technology’s research into a silicon quantum integrated circuit, the first step on the way to developing a practical quantum computing system.

And I welcome the announcement today by the Commonwealth Bank to increase their investment in this project with an additional $10 million over five years.

Additionally, we will establish an industry led Cyber Security Industry Growth Centre that will ensure Australia becomes a global leader in cyber security.

GOVERNMENT AS AN EXEMPLAR

If the Government is to ask the private sector to embrace innovation, it is right and fair that we do so too.

That’s why Government as an Exemplar is the final theme of the Agenda.

Already government departments are looking at innovative ways to solve our trickiest policy problems – like the InnovationXChange established in the Department of Foreign Affairs and Trade. But we can do a lot more.

To that end we will establish a new Innovation and Science Cabinet Committee to be chaired by the Prime Minister.

This new committee will be the spearhead of innovation policy across the government, and have ultimate oversight over the implementation of the Agenda.

Under that there will be a new statutory board, Innovation and Science Australia.

Established as an independent entity, it will be chaired by the now-Chair of Innovation Australia, Mr Bill Ferris AC; with the Chief Scientist, Dr Alan Finkel, as Deputy Chair, bringing innovation and science together in this important body.

Innovation and Science Australia will research, plan and advise government on coordinating policies that affect science, research and innovation. The work isn’t over with the release of the Agenda, it is just beginning.

The government spends over $5 billion on ICT solutions. Often that goes to big companies, and often we spend a lot money doing things the same old way.

We will make it easier for innovative small to medium enterprises to bid and win a share of that procurement spend.

The Digital Transformation Office, which leads government innovation in information and communications technology, will build a new Digital Marketplace.

An online directory of digital and technology services, it will bring government buyers and IT suppliers together to give smaller companies a fair shot at these valuable contracts.

I’m particularly excited by the Business Research and Innovation Initiative which will transform how government procures products and services.

The Government will work with Innovation and Science Australia to nominate national policy and service delivery challenges, and innovative businesses will compete to solve them, receiving grants of up to $100,000 to test out their ideas, and grants of up to $1 million to develop a prototype if they work.

Rather than the usual tenders to provide more of the same, we’ll see the best ideas win with new solutions to some of our thorniest problems.

Government will innovate in the way it works with business, researchers and universities to solve public policy problems, particularly when it comes to data.

Australia’s economic potential in the global economy will be strongly affected by the data revolution that will occur over the next 5 – 20 years. We have to respond to this.

Our government departments and organisations hold an extraordinary amount of unique data, data that has great potential for the creation of new and innovative products and business models by the private sector.

We’ll make non sensitive and anonymous data openly available by default, and work with businesses, researchers and the public to prioritise datasets for release in areas that have the greatest impact.

We will remove existing barriers to sharing public data for policy analysis, research and development across government.

We will also support Data61, a programme to put Australian industry and government at the cutting edge of digital and cyber security technology and capitalise on the emerging data-driven economy.

This will ensure that Australia builds and maintains a world leading data science capability and can apply that capability to develop new technology based industries and to transform existing ones.

So those are the four themes – Culture and Capital, Collaboration, Talent and Skills, and Government as an Exemplar; and the key elements of the agenda.

ISRAEL

It’s worth talking for a moment about the competition.

We’re not the only country seeking to leverage innovation into jobs and growth.

We can learn a lot from our competition – what policy settings might work for us, and what might not.

Israel is an excellent example.

Not so long ago, the Israeli economy was focused on agriculture and a struggling manufacturing sector.

It now has one of the world’s highest concentrations of innovation and entrepreneurship.

With a population of just 7.1 million, more Israeli companies are listed on the NASDAQ than from any other foreign country except China.

There’s no silver bullet, but we can certainly learn from this experience.

I will visit Israel this week to see what might work in Australia

and to discuss commercialisation policies and approaches with a number of universities and research institutions.

I’m delighted that we are working together to negotiate a treaty on industrial R&D collaboration and a treaty on science and technology.

Israel isn’t the only country to have made big leaps in innovation.

South Korea and Singapore have done the same.

They did it by continually investing in their people, first and foremost, and then in their research infrastructure and domestic and international collaboration.

And that is how China is climbing those ranks today.

As I noted before, people are the key to innovation and the sustainable prosperity it brings.

If we want to do what Israel, South Korea, and Singapore have done and transform our economy, we must nurture and inspire our people.

And if we get it right, imagine Australia’s future!

The only major natural resource Israel and Singapore, even South Korea, possess are their people.

In contrast, Australia’s educated workforce and world-class research system are all on top of our vast natural resources.

The potential for our future growth and success is limitless.

CONCLUSION

I said at the outset that it is timely and necessary to consider how we will build a smarter, more innovative and agile Australia that shares its success among its people.

How we build opportunity for all who live, learn, work, invest and collaborate here.

I firmly believe we are at a starting point of a new era.

There is a palpable energy in the community, which reminds me that in the area of innovation, Australians don’t wait for the government to take the lead – they get on and do it.

We want to help stimulate innovation and that is what we intend to do.

But achieving success will not come overnight.

Some things will happen very quickly, spectacularly. Others will take time and some will fail. That’s innovation for you.

This Agenda isn’t the last word on innovation, either. There are other ideas, there are changes we can make, policies we can refine.

I’m open to that. We’ve got a long way to go here, and I want to go together.

In closing I will quote an old Chinese proverb:

‘The best time to plant a tree was 20 years ago. The second best time is now.’

This isn’t our last chance, or our only chance, to get this right – but it is our best chance. Let’s take it.

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