Innovation agenda goes missing

Motherhood statements and mantras are all very well, but they need to be followed up with effective policy.

The government’s ‘innovative and agile’ agenda was, and still is, a farce. Evidence suggests this government is incapable of delivering a policy agenda remotely able to create future jobs in the innovation and science industry.

In fact, the latest Global Innovation Index rankings show Australia has slipped to 23^rd. This puts us behind China and New Zealand. In the critical area of knowledge diffusion we are now ranked 96.

While rhetorically appeasing, Turnbull’s innovation package — including tax incentives intended to help targeted companies raise capital in their start-up phase — at least in its first year, has proven to be a failure.

The first avenue for an ‘early stage innovation company’ (ESIC) to obtain favourable tax treatment is through satisfying a 100-point test. Not only do the eligibility requirements apply to an embarrassingly limited number of businesses, but satisfying those requirements demands considerable expenditure — which creates large financial risk.

The alternative avenue — the ‘principles-based’ test — has been criticised by business executives as being subjective, time-consuming and uncertain. Companies that take the risk of raising capital in an effort to meet the ESIC eligibility requirements, are likely to be hit with significant tax and interest liabilities if their application is rejected by the ATO.

In 20 years, Australia’s workforce will need to manage the challenges posed by artificial intelligence and technological automation systems. As such, there has never been a more ‘exciting’ and urgent time to deliver accessible tax incentives for high-tech companies and for the government to further support research and development. Australia’s Research and Development spending, at 2.1% of GDP, is dwarfed by South Korea’s 4.3% and Japan’s 3.5%.

In a policy climate that is increasingly subservient to self-destructive populism, a strong policy on innovation is integral to improving Australia’s economy in the long-term. A four-year plan is short-term. We need a less rigid innovation framework that has a long-term strategic framework.

Sam Westley is an intern in the Health Innovations Program at the Centre for Independent Studies.