PM Agenda

E&OE TRANSCRIPT
Interview - PM Agenda with David Speers

Monday 7 December 2015

SUBJECT: National Innovation and Science Agenda.

David Speers: Well as we’ve been discussing, the Prime Minister has unveiled his innovation statement today. It covers a whole bunch of portfolios, but the Minister at the centre of it is the Minister for Industry, Innovation and Science Christopher Pyne, and he joins me now. Minister, thanks for your time this afternoon.

Christopher Pyne: Pleasure David.

David Speers: You said a couple of months ago the Prime Minister had told you to release your inner revolutionary and not worry about the cost of all of this. Is what we’ve seen today really a revolution?

Christopher Pyne: It’s very transformative. I mean, what’s been surprising for the sector is how comprehensive this National Innovation and Science Agenda is. It really is a national agenda, and the stakeholders have responded extremely positively, from the universities, right across to small start-up representative organisations. Because I think people expected us to address issues around start-ups and enabling risks, I think they thought we’d address commercialising research; I don’t think they expected us to do science, technology, engineering and maths for teachers and for students, changing visas – the Government as an exemplar putting more money into Data61. But particularly the two big funds, the venture capital funds, the Biotechnology Translation Fund and the CSIRO Innovation Fund, both of which are new areas for Government to move into. I think they’ve been really surprised and impressed.

David Speers: Let’s go through some of that, the start-ups in particular. How do we measure the success of this? How many start-ups are you hoping will get off the ground?

Christopher Pyne: Well a lot of people estimate that 75 per cent of the jobs of the future will be ones with innovation, technology, science, engineering, maths as part of it. The measure of success will be the creation of jobs in small and medium-size enterprises: small growing to medium, medium growing too big, and ones starting off in the first place. Now, we are creating a structure for start-ups by changing things like insolvency laws, the depreciation of intangible assets, the creation of- the ability to claim tax losses for similar businesses rather than the same businesses, income tax and capital gains tax support for angel investors in start-up businesses. All of these will create the ecosystem, as they call it, which will allow an investment in jobs and growth in that sector.

David Speers: So what’s the measure of success then?

Christopher Pyne: Well jobs. Jobs and growth. Now, so far in the last 10 years it’s estimated that 1.4 million jobs are being created in start-ups, while 400,000 have been lost in traditional industries. So the measure of our success will be a growing economy and increasing employment.

David Speers: The tax offsets that you’re talking about here for those who invest in a start-up, how will you define what a start-up is so that that money isn’t being rorted, isn’t going in areas where it shouldn’t?

Christopher Pyne: Well start-ups are effectively very small businesses who find it difficult to access capital. I think last year from memory there are about 4500 businesses that had ideas that couldn’t get capital from traditional lenders. Now, how many of those would access this particular way of raising capital I can’t absolutely tell you, but I can tell you that there are at least 4500 businesses that tried to get capital and couldn’t access it. What we’re doing is creating the environment where enabling risk is encouraged, and support for start-ups is encouraged, and I think it’ll be very successful.

David Speers: But it’s not for any start-up. If I’m opening a small business I don’t necessarily attract that investor. You’re talking about specific industries that will only attract this tax break.

Christopher Pyne: Well we’re looking at industries that are innovative in nature, that are probably in the technology area in particular: communications, information technology. I mean, there’s a very wide range of industries, agriculture….

David Speers:… But if I’m opening a milk bar and have an innovative idea of how to do it, that doesn’t necessarily qualify.

Christopher Pyne: Well, we can’t pretend that absolutely every new business is an innovative business. I mean, if you are taking over a milk bar from a previous milk bar owner I think you’d be hard pressed to prove it was an innovative industry.

David Speers: Alright, so there will be defined rules around this fairly soon?

Christopher Pyne: Yeah, there’ll be defined rules, but we are trying to be more open rather than narrow. So we’ll be erring on the side of encouraging more innovation and support for innovative businesses rather than less.

David Speers: Will businesses also be able to take advantage of this tax break if they want to invest in a start-up?

Christopher Pyne: Of course. A tax break is for businesses and individuals and venture capital organisations and people who want to put their money behind start-up businesses.

David Speers: And any limit on how many times a company might be able to do this?

Christopher Pyne: I think there are some rules in the fact-sheets that have been presented. For example, I think it’s a limit of 200,000 per investor each year.

David Speers: Let me turn to university research. You’ve announced $127 million for research block grant funding. You did actually take out, though, in this year’s budget $263 million in university block grant funding. Was that a mistake?

Christopher Pyne: Well, I don’t believe that that’s the case. I mean, the truth is that Labor made a whole lot of promises to the education sector and the universities sector that were a gradient of increased spending …

David Speers: No no, in this year’s budget?

Christopher Pyne:… we haven’t taken any money away from the universities sector at all - none. Now, what we might have changed is the gradient of increasing expenditure that Labor didn’t have the money for that they promised to people and people then banked. Now, anyone that banked blue sky promises in the Labor Party I think was- that was hope over reality.

David Speers: You didn’t take any block grant funding away though?

Christopher Pyne: There has been no decrease in spending on university research in any budget presented by this Government.

David Speers: Alright, but the 127 million you’re now putting into research block grant funding …

Christopher Pyne: It’s extra money; of course it’s extra money.

David Speers: And you want to better match research to business outcomes. And specifically you’re talking here about universities having to report on their end-user engagement. Will this mean less research that’s not tied to an industrial outcome?

Christopher Pyne: No, it won’t. I mean, we’re very specifically not making a difference between basic and applied research.

David Speers: Right.

Christopher Pyne: The current six different regimes that support research in Australian universities and other places will be- will become two: one will be about all costs and the other will be about training. Now, we’re not going to make a differentiation when we’re- between applied and basic research but we will support for the first time a metric on research impact in a certain percentage of those grants. So some grants won’t have to show any likelihood of commercialization, at least 50 per cent in fact, but others will - if they have a research impact - have an advantage in terms of research. And I think the public are very comfortable with that because they know we are high-quality in terms of our research but we are the worst in the OECD for commercializing that research. So Ian Watt did a review for the Government. This is a- these are adopting Ian Watt’s recommendations he released last week. We’ve basically entirely adopt those to drive impact of research, which will drive jobs and growth. But they certainly don’t say that basic research or applied research are better or worse than each other.

David Speers: When it comes to the bankruptcy provisions here, this is something Malcolm Turnbull has particularly been talking about for a while. Just explain what it is going to mean for a director of a small medium size business who at the moment would be wanting to rush to appoint an administrator if problems arise in a business?

Christopher Pyne: Well, effectively it means what we’re calling a safe harbour for directors of companies who if they are heading towards choppy waters, or potential administration, and are therefore highly concerned about a personal liability for bankruptcy, will be given a period of grace where they appoint a reconstruction advisor where the shutters don’t come down on the business. So rather than businesses being shut down and secured creditors paid out will give people a chance to trade out of their difficulties in this in business that might otherwise be likely to do so. But the current law doesn’t provide that flexibility. I think that’s a very welcome reform. We’re also going to reform ipso facto clauses in contracts, where at the moment if a client of a business discovers that they- the business is in trouble they can instantly terminate their contract with that business therefore precipitating a catastrophic event in the business, where we would like businesses to be able to trade out of their difficulties. More like Chapter 11 in the United States but without the court’s involvement.

David Speers: If those contractors though, do that and cancel the contract, would a business still be able to trade its way out of difficulty?

Christopher Pyne: Well, they can’t at the moment. What usually happens is a contract is closed and the business just collapses. In the future, we’ll be removing those clauses so that won’t be allowed to happen.

David Speers: And the entrepreneur visa that you’ve announced, and also the pathway to residency for post-grads, high-quality post-grad students to keep them in Australia …

Christopher Pyne: Yes.

David Speers:… Labor’s already announced basically what you’ve announced today. Do you give Bill Shorten credit for any of these ideas?

Christopher Pyne: Well, Labor hasn’t announced what we’ve announced - they’ve announced a whole range of other things and …