Speech to Advanced Manufacturing Industry and Collaboration Forum

Australian Technology Network (ATN) Advanced Manufacturing Industry and Collaboration Forum

RMIT Melbourne City Campus

Wednesday, 30 September 2015

Good morning, I’m delighted to join you here this morning.

It’s appropriate that one of my first speeches in this portfolio is to an audience involved in transforming manufacturing technology.

The Industry, Innovation and Science portfolio is a central economic portfolio.

It is delivering the means by which Australian industry can lead the world in research and innovation and seize the opportunities that lie ahead.

Australia has the infrastructure to underpin this; the researchers, the universities and world-leading institutions like CSIRO, Questacon and others.

The Australian Government is creating the environment to commercialise the research through our Cooperative Research Centres and Industry Growth Centres.

We’re also providing business focussed support.

I’m looking forward to working with industry and the institutions to make sure Australia is a nation that offers the jobs of the 21^st century.

Dialogues like today’s are important to ensuring the business and research environments are complementary parts of ensuring that Australian economic activity keeps on changing and getting better.

Today’s conference, is to take a deep dive into the enablers and barriers to innovative collaboration between public researchers and industry.

It will look at how we can get a better return on our public research investment and grow the industries and jobs of the future.

I congratulate ATN for organising this event.

And I thank you all for investing your time in attending and contributing your insights to today’s discussions.

You might ask why a forum like this is needed, after all Australia’s growth performance has been amongst the best in the OECD for more than 20 years.

That excellent performance I’ve just referred to has been based on the legacy of successful economic reform, including floating the dollar, flexible labour markets, tariff reductions and the introduction of the goods and services tax while reducing and eliminating other taxes.

We’ve also benefited from the explosive growth in Asian economies which has driven demand for commodities.

Unfortunately there’s always a ‘but’.

The period has been challenging for Australian manufacturing.

It’s seen its share of GDP and employment decline substantially over this time.

The main challenges to our manufacturing base have come from increasing competition from emerging economies like China, as the new global manufacturing powerhouse.

All developed economies have undergone similar structural changes.

Services now account for an increasingly large part of these economies.

We need to create a new legacy.

With the investment phase of the resources boom winding down and commodity prices softening, our economy is in transition.

The high terms of trade of the past decade are retreating and national income is under pressure as a result.

The other side of the coin is that the lower dollar creates opportunities to grow exports and re-balance our industrial structure.

There’s room for optimism for manufacturing.

Some recent research has given us new understanding of Australia’s Advanced Manufacturing exporters.

Preliminary data from a study into global production shows Australia’s share of global exports of elaborately transformed manufactures has grown over the last 25 years, notwithstanding the significant exchange rate movements over that time.

In contrast, the OECD share has declined during the same period.

The study confirms that Australia has comparative strengths in high value, highly transformed manufacturing.

Some of the notable achievements include the pin-up success of Boeing Australia’s moveable trailing edge technology for the 787 Dreamliner in global supply chains.

And Carbon Nexus is generating huge opportunities through its globally unique, open-access carbon fibre/composite research facility at Geelong.

Most recently one of Carbon Nexus’ 11 international industry partners, Quickstep Holdings, itself partnered with some of the world’s largest aerospace/defence organisations, decided to locate its R&D facilities in Geelong.

It just adds further to the critical mass of expertise being developed at Deakin’s carbon cluster at Waurn Ponds.

The good vibes continue among Australia’s small to medium sized enterprises, which are innovative by world standards.

Our SMEs are ranked fifth in the OECD on innovation, and there are many examples of these SMEs supporting large Australian exporters through local supply chains.

But, despite these positive signs, the Government is well aware of the reality for many machinery and equipment manufacturers affected by declining mining investment.

Taken with the imminent closures of Ford, Holden and Toyota, the future looks particularly difficult.

As an open economy, Australia needs to engage with the complex task of economic reform and restructuring, particularly addressing underlying issues of efficiency and productivity.

Recently the Productivity Commission’s 2015 Productivity Update showed that labour productivity have improved since the terms of trade peak in 2012, admittedly from a weak base.

Productivity growth is the key to competitiveness, jobs growth and ultimately our living standards; in turn it’s driven by innovation.

Many studies have shown that innovative businesses are twice as likely to export, increase productivity, employment and training and five times more likely to increase their number of export markets.

Australia’s performance against measures of innovation is mixed.

In terms of business innovation and entrepreneurship we rank 12^th in the world on business environment—indicators like ease of starting a business, resolving insolvencies and paying taxes.

We have high quality research; Australia ranks well above the OECD average in terms of our share of the world’s top one per cent of highly cited publications, almost doubling our performance between 2005 and 2013.

But it’s not enough to be globally competitive in research if that research is not connected with the rest of the economy that funds the research.

To be sustainable, research has to deliver benefits to Australia as a nation.

It is estimated that every $100 million invested by business in R&D, returns between $150 (million) and $200 million to the economy.

Innovation activities, like R&D, create positive spillovers that improve productivity by demonstrating the benefits or lowering the cost of a new technology, and by spreading knowledge.

Australia is poor at commercialising and patenting its research.

Australian businesses are not investing enough in R&D and are well behind other OECD countries in creating new or improved products, they don’t collaborate with research partners and therefore constrain their access to the latest technology and better ways of operation[1].

Collaboration with research partners is important because:

• more intense global competition has drastically shortened product lifecycles, meaning business has to develop new offerings more quickly;
• innovation has become more complex and costly, requiring more diverse knowledge inputs;
• as businesses specialise, they need to look outside for expertise.

The Australian Innovation System Report 2012 found that, compared to innovative businesses that don’t collaborate, innovative Australian businesses that collaborate are:

• 23 per cent more likely to report increased productivity
• 24 per cent more likely to report increased profitability
• more than three times more likely to increase the number of export markets targeted
• 48 per cent more likely to increase the range of goods or services offered
• 24 per cent more likely to employ more people
• 34 per cent more likely to train employees, and
• more likely to introduce world-first innovation.

Global Kinetics Corporation’s KinetiGraph is one example of how world-first innovation can occur through industry and public researcher collaboration.

It’s a wristwatch-like device that monitors movement data to help doctors diagnose and treat movement disorders.

It was developed in collaboration with Victoria’s Florey Neuroscience Institute.

The KinetiGraph received venture capital support from the Australian Government as well as raising $1.5 million through Australia’s largest crowdfunding round to date.

It’s approved for sale in the US, the EU and Asia.

Best of all though the KinetiGraph is manufactured in Australia.

I spoke earlier about the legacy of successful economic reform.

It’s important that we continue economic reform targeted at success.

The Australian Government has an essential leadership role in economic reform.

The business environment is crucial.

Therefore we must promote productivity and competitive markets by providing a stable macroeconomic environment and effective, light touch regulation.

It’s essential to play to our competitive strengths and facilitate the flow of resources from declining to growing sectors.

Our Industry Innovation and Competitiveness Agenda does this.

It sets out a new industry policy paradigm by placing science and research at the centre of fostering the innovation that will provide the framework to transition industry to high-value added products and services.

Overall, the agenda plays to our strengths and tackles the critical issues facing Australian businesses to build our long term economic growth and prosperity.

It does this with targeted action to:

• encourage industry and researchers to collaborate and foster entrepreneurship
• create a lower cost, business friendly environment
• improve science, technology, engineering and mathematics education, from preschool through to employment, and
• increase workforce skills and infrastructure investment.

The $225 million Industry Growth Centres programme is a central initiative in the agenda.

It takes a sector-based approach to drive growth, productivity and competitiveness by initially concentrating our investment on five key sectors with strong growth potential.

Each sectoral growth centre will set long-term strategies including: opportunities to boost productivity and skills; create jobs; reduce red tape; and engagement with international markets.

And they’ll work to unlock commercial opportunities by building links between businesses and industry organisations and the science and research sector.

One centre is devoted to advanced manufacturing.

Its planned activities include linking Australian manufacturers with global companies and their supply chains, identifying skills and knowledge needs, and developing the demand for and supply of future employment opportunities.

Unfortunately Andrew Stevens who chairs the Advanced Manufacturing Growth Centre is unable to join you today.

He’s been very active in conducting roundtables and meeting stakeholders across industry, research and government to develop the centre’s priorities.

I expect the growth centres in particular to get considerable support from the Cooperative Research Centres programme.

The CRCs have considerable experience in industry-outcome focussed research and also turning out graduates with hands-on industry experience.

CRCs have proven to be of great benefit to R&D and have significantly improved the competitiveness, productivity and sustainability of Australian industries.

For example, the Auto CRC has delivered two exciting export opportunities in different advanced manufacturing areas.

In SA, the SMR automotive thin film coating project has resulted in the design of a lightweight and strong plastic mirror for motor vehicles.

SMR is producing around 50,000 mirrors a month and exporting to the United States.

And the CRC’s $170 million E-Bus project, a collaboration between Swinburne University of Technology, the Malaysian Automotive Institute, Australia’s Bustech and a private Malaysian manufacturer has almost completed prototype buses for Australia and Malaysia.

The CRC programme has been a worldwide exemplar, but we were conscious that there was room to refine it to align it to the new industry policy paradigm.

The recent CRC Review recommended changes that are designed to align CRCs more closely with the goals of the Industry Growth Centres.

In fact, I expect that in future, CRCs will carry a major part of the research load for growth centres.

The new Innovative Manufacturing (IM) CRC will work with the Advanced Manufacturing Growth Centre under a recently signed Memorandum of Understanding.

It will continue research collaborations in support of growth in the sector.

The IM CRC will help Australian manufacturers transition to knowledge-intensive competitive industries in areas of global growth.

Australian company RODE Microphones will be part of the CRC.

RODE is using additive manufacturing to develop miniature and sub-miniature microphones that can be used in hearing aids, mobile phones and voice recognition.

Already RODE microphones are used with Apple and Android smartphones and tablets.

The agenda will better leverage the government’s $9.7 billion investment in science and innovation and to drive economic growth by building a culture of entrepreneurship across the business and research sectors.

Part of this lies in our Boosting Commercial Returns from Research Strategy.

This strategy is designed to create more incentives for collaboration between researchers and industry and increase access to publicly funded research.

We are making sure that researchers are trained to work closely with industry, enabling them to bring their ideas to reality.

And we are providing business with greater online access to research, enabling firms to identify commercially relevant research as well as potential research partners.

Other components of the strategy are well advanced.

This includes formation of the Commonwealth Science Council to advise the government on science and related technology issues.

We’ve established nine science and research priorities to align national research excellence with Australia’s industrial strengths, global trends and community interests.

The ATN has made an important contribution to this process.

In particular I’d like to thank Australian Academy of Technological Sciences and Engineering fellow Professor Göran Roos, who has worked across the innovation system in Adelaide, Sydney, Singapore and Melbourne, and has done valuable work on capability mapping in advanced manufacturing.

We’ve also developed an IP Toolkit to help smooth out any wrinkles in intellectual property issues when developing collaborations between industry and researchers.

In other areas, we’re conducting a major research infrastructure review and we’re reviewing university research funding and policy.

We are also promoting entrepreneurship with a package of initiatives under the Entrepreneurs Programme.

It works on business management, building connections between researchers and business and helping commercialise good ideas through a network of quality facilitators and advisers.

Since the programme began just over a year ago, it’s delivered more than 500 business evaluations and provided $2.6 million in assistance through 64 Research Connections grants.

The R&D Tax Incentive is the Australian Government’s principal measure for increasing business R&D and an essential element of the agenda.

It provides tax relief of almost $3 billion to more than 13,000 innovative Australian companies.

The incentive is being reviewed as part of the Tax White Paper to ensure its operating efficiently and effectively.

CSIRO is refocussing its commitment to building stronger connections with industry to encourage the application of research, especially where it drives improvements in Australia’s economic competitiveness.

And taking a wider, more strategic approach, we’re working on a national approach to science, technology, engineering and mathematics capability across the economy.

Our investment will help meet current and future industry skills needs.

Special circumstances demand special measures.

Two elements of our $155 million Growth Fund will be of interest to the advanced manufacturing sector:

• The $20 million Automotive Diversification Programme will help automotive supply chain firms enter new markets, and
• The $62 million Next Generation Manufacturing Investment Programme will accelerate private sector investment in high value non-automotive manufacturing sectors in Victoria and South Australia.

I expect co-investment from South Australian participants in the next round of the Next Generation Manufacturing Investment Programme will result in $73.3 million being put into advanced manufacturing in that state.

Talking of advanced manufacturing, the emergence of robotic, 3D printing and similar disruptive technologies creates both opportunities and threats.

We have many strengths to build on in both public and private innovation.

The recent development of a titanium sternum and rib implant in a collaboration between Anatomics and Lab 22, CSIRO’s 3D printing facility at Clayton, just shows the potential of collaboration between industry and science, and 3D printing itself.

Our advanced manufacturing companies are achieving enormous breakthroughs and are confirming that there’s a critical mass of knowledge, skills and capacity to capitalise on the new opportunities it presents.

Diffusing advanced manufacturing technologies across our traditional manufacturing sector could be game-changing in terms of our global competitiveness.

The Advanced Manufacturing Precinct here at RMIT has been, and I’m sure will continue to be, another major driver of collaborative innovation in this region.

It’s already turned out commercial applications across a remarkable range of industries, from aerospace, defence, automotive, biomedical and textiles.

Collaborating on innovation will be a critical enabler in the transformation of industry to become the producer of the goods and services of the future.

We need to redouble our efforts in putting our incredible knowledge, capabilities and research to work and to better understanding the roadblocks to doing this, compared to other countries.

Conferences like these are valuable ways to make working together work better.

They can help by advising governments on how we do this.

It’s why the Australian Government has funded this series of four forums by the Australian Technology Network.

The impetus for change in the economy is there.

It needs a concerted effort.

I look forward to hearing more of the outcomes of today’s forum and I wish you all well.

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