The upcoming federal budget provides a “once-in-a-generation” opportunity for structural economic reforms to drive the next Australian economic boom, according to a centre-right think tank that is calling for the establishment of an innovation agency and enhancements to the research and development tax incentive.
The Blueprint Institute, a new think tank founded by two of Julie Bishop’s former advisors, has called for “real vision and reform” in next week’s budget in order to “ignite the next economic boom”.
“We punch above our weight in science, technology and the arts but we’re no global hub of innovation and creativity. We need smarter policies to spark the next boom. And to make sure a future sudden catastrophe doesn’t put it at risk,” the Blueprint Institute budget paper said.
Following the COVID-19 pandemic, “normal isn’t good enough”, the Institute said, arguing the recovery is an opportunity to transform the next decade into something akin to the “roaring twenties”.
“We should be willing to take more risks with the public purse on long shots that could spark a revolution in ideas, and pave the way for the development of whole new industries. Indeed, governments are often better placed than other entities to bear those risks for the potential future betterment of Australian society,” the Blueprint Institute report said.
The Blueprint Institute was established last year, with its board including former Nationals NSW legislation council member Jenny Gardiner and former Liberal National QLD MP Lisa France. The think tank’s strategic council includes former industry minister Christopher Pyne, Bruce Baird and Wendy Machin.
The think tank’s budget paper called for a range of major policy reforms, including significant funding for electric vehicle infrastructure, an Arts Future Fund and a Research Institute for Sudden Catastrophes.
The budget should include funding for the creation of an Australian Innovation Agency, which would be closely based on the Israel Innovation Authority, an independent, publicly-funded agency that invests in early-stage startups, established companies, academic groups and global corporations, the paper said.
The Israelia agency funded 1,650 R&D projects in 2019 at a total cost of $750 million, with grants repayable at 3-5 per cent royalties. The Agency also offers a four-year grant scheme covering about one-quarter of the cost of new employees.
The Israel Innovation Authority was launched in 2016 as a revamped version of the Office of the Chief Scientist. It offers an R&D fund, incubator program and a magnet program which supports partnerships between academic and commercial R&D programs.
A similar body in Australia could help to stimulate new startups and innovation, the Blueprint Institute said.
“The Australian Innovation Agency could drive greater startup development and create new innovation. A fund proportional to that in Israel would see around $2.5 billion invested each year. But a more modest annual investment could be considered initially,” it said.
The think tank also called on the federal government to make improvements to the research and development tax incentive, saying there is “more we could and should do” than the recently announced changes, which come into effect from July.
“The government should liberalise its rigid definition of R&D to unlock more private spending. The current definition discourages early-stage R&D where projects are less certain or resources more sparse,” the paper said.
It also called on the government to scrap the minimum spending requirement of $20,000 and the proposed 5 per cent reduction in the RDTI offset for businesses with a turnover between $20 and $50 million, and an R&D intensity under 2 per cent.
Other significant reforms options canvassed in the paper include the establishment of a Research Institute for Sudden Catastrophes, with $50 million in funding annually. This institute would study and plan for low-probability catastrophic events and give independent advice to policymakers.
The paper lists artificial intelligence as a potential area of research for the new institute.
The federal government should also look to invest at least $875 million over the next decade in electric vehicle infrastructure around the country, the paper said.
“Carmakers’ EV offerings are far more limited in Australia than in other markets. Scale matters a lot for product offerings. One potential reason for this is Australia’s paltry EV charging infrastructure. As a vast country, our numbers need to be higher than our peers, not lower,” it said.
“Providing it efficiently would require coordination between carmakers, which might be difficult for a range of reasons. So the government should lead it be establishing a new electric vehicle charging infrastructure investment fund, which would co-invest in the infrastructure needed to support the electrification of the transport sector”
To match the UK government’s spending on EV infrastructure per capita the Australian government would need to spend at least $875 million through to 2030, but this number should be higher due to Australia having twice the road mass than the UK.
But an initial commitment of at least $875 million would “get us driving in the right direction”, the think tank said.
The federal budget should also facilitate Australia tripling its green R&D spending to at least $500 million per year, the Blueprint Institute paper said.
“Australia is rich with scientists and entrepreneurs who drive innovation in clean technology. The government’s plan to decarbonise through technology will require important breakthroughs in hard-to-abate sectors. An increase in funding for clean energy R&D will help us slash emissions and reach net-zero faster,” the paper said.
“Dragging the chain on R&D harms out international reputation and diminishes our influence among our allies. Contributing to the global effort buys us a seat at the table.”
An Arts Future Fund with $3 billion in Commonwealth funding should also be established and run by the Future Fund, which the net investment returns providing ongoing support to the arts, the paper said.
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