James Riley
May 23, 2018

Govt lukewarm on ISA strategy

R&D

Govt lukewarm on ISA strategy

Bill Ferris: Still fighting to keep Australia's business expenditure on R&D alive 

The federal government has quietly released its lukewarm response to the Bill Ferris led Innovation and Science Australia 2030 strategy, offering support for just 17 of its 30 recommendations and ‘in principle’ support to 10 others.

While the response maps the budget initiatives announced by Scott Morrison to specific recommendations – such as the $500 million toward a National Mission on genomic research – other core recommendations of the strategy were overlooked.

But the government has effectively rejected one of the central pillars of the ISA strategy, which had been to restructure the R&D Tax Incentive to reward higher intensity activity, and to use the savings to increase direct grants.

In fact, the $2.4 billion in savings produced over the four years of the forward estimates by the restructure of the R&D tax incentive has been largely pocketed by government, despite some budget funding for innovation infrastructure announced over a ten-year horizon.

Innovation and Science Australia had also sought a commitment to ensure funding for research science and innovation did not fall below its medium-term average of 0.63 per cent, and that savings from the restructure of the R&D tax incentive be deployed to direct assistance through Cooperative Research Centre projects, the Industry Growth Centres and the Entrepreneurs Programme.

These central themes were noted by government, but will not be acted on.

Also by-passed was ISA recommendation 19 that would have offered a collaboration premium of up to 20 per cent on the non-refundable tax offset that aimed to encourage businesses doing more R&D work with universities and institutional research. This was noted but not acted on.

The dismissal of the measure to improve Australia’s business expenditure on research and development (BERD) performance – and the rejection of the collaboration premium – will have shocked the ISA board.

ISA chairman Bill Ferris did not hide his disappointment at the rejection of these core policy recommendations, even in his prepared media statement.

While carefully applauding the measures that were fully supported, Mr Ferris – who was a co-author of a landmark review of the R&D incentive two years ago – said the ISA board would continue to press for change.

“ISA’s advice to government continues to be that these changes should be accompanied by expansion of non-tax-based incentives of the kind used by many of our competitor nations,” Mr Ferris said in a statement.

“This is necessary to ensure that the current negative trajectory in business expenditure on research and development (BERD) can be reversed.” he said.

“This reversal is core to our 2030 Plan and should remain a top priority for both business and government. Accordingly, the Board believes additional direct incentives to support BERD will be required to ensure that Australia becomes a top tier innovation nation by 2030.”

The funding and policy support for the National Missions continues to be a head-scratcher.

While the federal budget directed $500 million over ten years to fund significantly improved genomics and precision medicine capability, the support says little about the ‘national mission’ concept – which was supposed to drive cultural change in attitudes to tech and innovation policy among the broader population.

The government response heaps more pressure on the Digital Transformation Agency (DTA) to be all things to all people. As part of recommendation 17, the DTA will be instructed to accelerate digitisation programs – and to deliver half of the projected savings of 12 per cent by 2022 and the rest by 2026.

ISA also sought additional resourcing for the DTA to provide better benchmarks to measure and report service improvements to be delivered through dashboards, and to set ‘citizen satisfaction’ targets to be assessed against key performance indicators to drive better accountability in departments and agencies.

While government supported the recommendation – in that it was largely in line with the existing Digital Transformation Agenda – it was tepid about the provision of additional resources to get it done.

The government response foreshadows the release of the government’s planned Digital Economy Strategy, with formal support given to ISA recommendation 8 calling for prioritising advanced capability in AI and machine learning.

The funding, although tiny, is a toe-in-the-water from the government. It includes money to Data61 for the development of an AI and machine learning technology roadmap and ethical frameworks.

The government also accepted the ISA recommendation 10 to enable better access to overseas talent through continuing and targeted updates to skilled immigration.

“The 2030 Plan has already greatly informed the Government’s investment decisions and will continue to do so,” Industry Minister Michaelia Cash said in a statement.

“Our recent commitments build on existing science, research and innovation investments, including through the NISA, which are already reaping rewards from investment opportunities through to addressing inequity issues for women working in STEM sectors.”

“We will continue to work with ISA to ensure innovation, science and technology drive the best economic outcomes for Australia, help us remain globally competitive and ensure we have the skills and jobs we need to prosper now and into the future,” she said.

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