Speech - Monash University: Research and Productivity

“The role of research and universities in the Coalition’s productivity agenda” Address at Monash University Hon Christopher Pyne MP Shadow Minister for Education, Apprenticeships and Training Manager of Opposition Business in the House of Representatives 30 April 2013 [Salutations] Australia's productivity growth has declined noticeably in recent years. The trend in productivity growth is determined by the development of new technologies and how efficiently resources are organised in the production process. Boosting our productivity is vital because it means more prosperity for the same effort. As RBA Governor Glenn Stevens has said “everything comes back to productivity. It always does.” The Coalition has a plan to get productivity growth on the rise again. We need to engage with our universities, and we need to invest in research. And, we need to couple that with innovation in an entrepreneurial way. That is what I am here to talk about today: how the federal Government can create the structures that encourage innovation, that give our scientists the best chance of creating valuable new products or services. We need to recognise the importance of research in our universities and the role it has in Australia’s future. We need to understand that, to the extent we are in a better economic position currently than many European economies it is, in spite of this Government’s policies, rather than because of them. Labor has enjoyed the benefits of the building blocks put in place by previous governments. Our economy was fortunate to have been steered in the right direction by the Howard government and to be buoyed on a tide of natural mineral wealth. Only a Labor government could take us off course. Only a Labor government could slap a debilitating tax across the mining sector. When Governments make bad decisions, or inconsistent decisions, investing in a country is more risky and investors are more cautious. This adds to Australia’s sovereign risk that deters foreign investment and has the potential to slow or indeed stop projects. A spate of recent decisions illustrates Labor’s destruction. There was the live exports over-reaction on the back of a television programme; the introduction of a carbon tax that we were promised would not happen; and changes to funding for the automotive sector that caused Holden Managing Director, Mike Devereux, to say (27 June 2011): ​"We cut a deal with the Prime Minister (back in 2008) and then midway through ... ​the rules of the game changed … it certainly worries a multinational parent when ​sovereign risk begins to be something that is bandied about in terms of doing business ​with Australia." The abolition of the Australian Building and Construction Commission has increased uncertainty for those investing in major infrastructure projects, including for those in the mining industry who have now abandoned or delayed new projects due to the cost of doing business in Australia. It is clear that many of Labor’s decisions have increased the sovereign risk of Australia by making investments more uncertain, more risky and more expensive. Natural resources do not last forever, industries slow and the demand for our metals and coal from our trading partners will peak. Countries need steel and coal in mass quantities while they are industrialising; once that process is over, their appetite diminishes. There is no doubt that the current Labor Government has betrayed the trust of all Australians. Their lack of competence and the game of “pass the parcel” they play over who gets to be Prime Minister is clear evidence that Labor has lost its way. Trust is one of the most important characteristics of a leader and their government. It is abundantly clear that the Labor Government has breached the trust that many Australians put in them when they were elected in 2007. Australians have rightly lost their belief that the Government can provide our children with a better education; they do not trust that our borders will be protected and certainly do not trust the Government to ease the growing cost of living burden every Australian family faces. Having seen Labor in Government firsthand, I am not surprised that the Government has failed to manage something so vital to our future. Labor governments have proved they cannot control spending while the Coalition believes at its core, that running a budget is all about spending within your means. The simple truth is that this Government has been running the nation’s budget as though it would win Powerball. This is not sustainable. What counts is the nation’s future and the damaging debt our children and grand children will inherit. The Coalition’s concern is not solely about rising government debt. The Government has failed to embrace a productivity agenda. Australia’s productivity is declining. According to the Australian Bureau of Statistics, multifactor productivity has declined by around 3 percent over the past five years under Labor. Let’s put that in context. Productivity is, at its root, about doing more with less. It’s about working smarter rather than harder. In a speech I delivered in 1995 to the Griffith University Liberal Club, I remarked that the real goal for government is to deliver performance, to make government do more and tackle new problems with less. This mantra of doing more with less is not new. The challenge lies in actually making government smarter and genuinely making government work better. Productivity growth has been the dominant trend in human history. Spurred on by human creativity, by competition, by the prospect of profit, we get better and better at doing what we do. But in recent times, we have been slipping back against the tide of history: we have, in aggregate, been getting worse. We have been doing less with more. Some would argue that this was inevitable because we’ve already plucked the low hanging fruit. While it is true that productivity growth has declined across the OECD, only three other countries have experienced a slowdown anything like Australia’s. The names of those countries should concern you: Mexico, Portugal and Ireland. So, what can we do to improve our productivity? We can look at what happens in our workplaces and ensure that workers and business have the tools to put in place arrangements that suit their respective needs. We need to concentrate on letting business run their businesses. We can hack away at some of the ever increasing red tape that is choking Australian businesses, so that they can be free to focus on what they do best. We can improve education and training, so we have more highly skilled workers. And, we can invest in innovation. Innovation is a broad term, encompassing almost anything that a firm or institution exploits to improve productivity. Research and development is only a part of that but it is certainly a vital part. It is appropriate that I am here at Monash University to talk about productivity because Monash has been amongst Australia’s great innovative institutions. Monash University’s contributions to Australia through its IVF programme, through the development of anti-flu drug Relenza, and through its breakthroughs in stem cell research are well known. That tradition is continuing today. Monash researchers are developing new light metals to build lighter, stronger aircraft. They are developing a bionic eye. They are creating new power cells to harvest solar energy more efficiently. The benefits to the economy of innovation like this are obvious and they can be quantified. The OECD has identified that public and private research and development exert significant positive effects on productivity in Australia. The OECD found that in Australia, a sustained 1 per cent increase in business research and development led to a long run increase in productivity of 0.11 per cent, with a comparable result of 0.28 per cent for publicly funded research and development. Australia’s reputation as an innovator will be vital to the future of our relationships with India and China. If we are to survive and grow as a valued trading partner, we must build a stronger, more productive and diverse economy with lower taxes, more efficient government and more productive businesses that will deliver more jobs, higher real incomes and better services. That is going to become increasingly difficult. Although we have a long and firmly entrenched tradition of scientific research, other countries in our region are catching up. In 2012, the Chinese Government increased its spending on science and technology 12.4 per cent, to around US $36.2 billion. Chile, a country of a similar size to Australia and one of the great economic success stories of the past couple of decades has increased the budget of its state science and technology funding agency by a factor of 2.7 since 2008, from US$182 million to US$485 million in 2012. It would be nice to take comfort in the idea that Australia is punching above its weight when it comes to the sciences. But as Professor Ian Chubb the Chief Scientist recently pointed out, when you compare us with the countries with whom we share a research tradition, we’re tracking pretty unspectacularly. The most often-used metric for research quality is the citation rate of research papers. Although we have a citation rate comfortably above the world average, we perform below the European average, and below the average of many of our research partners. We still outperform competitors like China and India, but our research is cited less often than that of Germany, Norway, Belgium, Canada, Finland, Great Britain, Sweden, Denmark, Switzerland and the US. We sit squarely in the middle of the pack. None of this is to say that Australia does not conduct high quality research – we do. In multiple areas of earth sciences, medicine, agriculture and engineering, we lead the world. Over the past decade Australia has produced four Nobel Prize winners and four of the previous Australians of the Year have been medical researchers. The bionic ear, in-vitro fertilisation, ultrasound and Wi-Fi have all been born from Australian ingenuity and research. The picture is a little greyer at the next stage: commercialisation of our research. The more value that can be added to our research here, in Australia, the greater the benefit to our national economy. The Coalition is determined to ensure Australian universities have their academic standing protected, so that students can be confident their degrees are taken seriously and their research is considered world class. At the moment, too much of Australian scientists’ hard work is failing to generate available returns or generating money for offshore interests. Innovation is difficult to measure, but the most widely accepted metric is triadic patents: patents that have force in the US the EU and Japan. Such patents are expensive to register, so they tend to be an indicator that something of real value has been created. Australia sits at about one third of the OECD per capita average for number of triadic patents. From 2007 to 2009, the OECD average was 38 triadic patents per million people. Canada, a frequent yardstick for Australia had 18 per million. Australia had 14. So what’s going wrong? As our rich history of scientific success illustrates, we have the talent. We have the capacity. Depending on how you measure it, we have anywhere between five and seven universities in the world’s top 100, so we have the institutions. What we are lacking is a way to bring it all together, to get the best out of our assets. There are two classes of disadvantage under which we labour that stop us from getting to the top. The first is the fact that we are a middle sized economy with a preponderance of small businesses that find it difficult to finance sustained research and development on their own. Research and development is inherently high-risk—high-return and being a small market a long way from the rest of the world means we sometimes struggle to attract venture capital. The second class is much easier to do something about: misguided government policy around research. As Professor Fred Hilmer, the Vice Chancellor of University of New South Wales, said last year: “Given the budget situation and substantial increases in cost to the Commonwealth from higher participation, a significant increase in government funding is unlikely. The lack of strategy is evident from stop/start funding, for example, providing support for new medical research buildings but not for staff and materials to do the work; support for major infrastructure like a synchrotron with a life of 30 years, but not funds to operate or maintain it.” We need to do much more to get our ducks in a row. One of the aspects of research policy that creates inefficiency is the grants process. A recent study from the Queensland University of Technology found that, in 2012, scientists in Australia spent more than 500 years’ worth of time putting together National Health and Medical Research Council grant applications. Only around 20 per cent of those applications were successful. That equates to around 400 years of wasted time and effort – time and effort that could have been spent on research. That is a shocking amount of wasted time simply gone to the wayside. It is ironic that the very sector we trust will increase our productivity is itself mired in such monstrous inefficiency. It is not the fault of individual researchers – they are only filling out the paperwork and forms that this Government has given them. Under Labor, every single research grant is a competition. Competition is not something the Coalition has a problem with. But a competition that does not allow the players to differentiate themselves is no good to anyone. The system as it currently stands only allows limited specialisation. The fact is that the vast majority of research funding in this country – some 70 per cent - goes to our eight top-ranked universities, the Group of Eight. These institutions have chosen to focus on research, they attract top research talent from across the globe and they are more often than not able to make a more compelling case for research funds. This leaves those from other universities with the knowledge that, despite spending weeks of their time putting together grant applications, they are statistically less likely to succeed. In my view, merit should be the only basis upon which grants are made, not whether a university has self selected to be predominately research or predominantly teaching focused. There is a view within the higher education sector that research is critical to the maintenance of the quality of learning and teaching by informing teaching; you can’t have one without the other. Nevertheless, I believe there would be real benefits if government policy encouraged some universities to maximise their opportunities for research and for others to focus more on teaching. In 2011 in the David Davies Memorial lecture in Brisbane on “excellence in universities” I warned that our universities had fallen in international comparisons in the past six years. Unfortunately we have not improved since then. With the latest announcement of $2.8 billion in cuts to the higher education sector, on top of $1 billion in research cuts announced in last year’s Mid Year Economic Forecast, Australian universities will potentially be struggling to maintain the quality of higher education. We must give universities more freedom to focus on what they are good at, and to provide their communities with the services they need. If that means that some universities want to focus significantly more on teaching, then they should confidently do so. Providing the next generation of highly skilled workers that Australian employers need is just as valuable to the economy as developing the next cochlear implant. Government policy should enable specialisation, not discourage it. That principle extends to the level of individual researchers. We need to find ways to allow them to focus on what they do best. Nobody trains to be, for example, a neuroscientist because they want to spend their time writing grant applications. The 400 years of time and effort that was wasted last year could have much more gainfully been directed towards core academic activities. The Coalition is determined to foster the creative and economic potential in our education and research sector by reducing their regulatory and compliance burden. I would like to echo Tony Abbott in his address to Universities Australia in February of this year: “As intellectual powerhouses, good universities deserve all the support and encouragement they can reasonably be given and as much freedom to run their own affairs as can reasonably be managed. They have no more right to waste money or to be indulged than any other institution. They should have to make a case for taxpayer support like every other good cause. Still, provided it goes into teaching or research, university funding rarely fails to be worthwhile.” To help us get the most out of that funding I propose to examine the feasibility of extending a proportion of research grants from three to five years. A policy option that will both cut down on the time spent applying for grants and is a more realistic reflection of the timeframes involved in conducting world-leading research. We could also reduce the amount of time wasted applying for grants by introducing a preliminary Expression of Interest phase into the grants process. Of course, the grants process should be open to everyone, and nobody can blame any researcher for seeking out funding for the project that ignites their passion. But we could save a lot of time, energy, and emotional investment by only requiring those who are genuinely in with a shot to undertake a full grant application. Finally, although throwing more money at something is never a solution in itself; our levels of funding should be commensurate with the importance of the role that research plays in the economy. The Liberal Party has always recognised this. We recognise that funding for medical research is the best long-term investment a government can make in the health of the Australian people. My colleague and Leader Tony Abbott announced earlier this year that there would be no cuts in this area under a Coalition government because it is one of our country’s greatest strengths. Of course, providing more money for research is something that is much easier to do when the budget is in surplus and the nation’s net public debt has been paid off – as the last Coalition Government demonstrated. Over the term of the Howard Government, the number of students in higher education increased by 63 per cent, we established the $6 billion Higher Education Endowment Fund and when Tony Abbott was Minister of Health in the Howard Government, he announced an additional $905 million for Australian health and research in 2006 and in 2007 and provided $485 million in grants to medical research facilities. Contrast that with the Labor Government’s $1 billion in cuts to research, universities and student support last year, of which about half was to research programs at universities. Even without the further $2.8 billion of cuts announced a few weeks ago, this was a move that seemed designed to frighten off international investors and lead companies to transfer their innovation activities elsewhere. Sustainable Research Funding was cut by $499 million; facilitation performance funding from 2014 was deferred, cutting $270 million; support for Master’s degrees was deferred, cutting $167 million; and student start-up scholarships were frozen rather than indexed to 2017, cutting $82 million. We look to the research and development sector, and universities in particular, to drive innovation and it has proven time and time again that it can do so. But the current framework is encrusted with misaligned incentives that hamper productivity. If it is to fuel productivity, we must ensure that our innovation system is itself productive. In the event that the Coalition is fortunate to be elected at the general election this year these are some of the values that will drive our approach to universities and research. I am certain a newly elected Coalition government and the universities can work together to be drivers of productivity and growth leading to a flowering of innovation and invention that raises the standard of living in Australia and improves the lot of everyone around the world.