Maurice Newman on innovation

James Riley
Editorial Director

Maurice Newman has some interesting views on innovation in Australia, and it is unfortunate they didn’t get wider circulation in the tech sector’s discussions on industry development.

Newman is, of course, well known as Tony Abbott’s favorite business leader and chairs the Prime Minister’s Business Advisory Council. His views tend toward the extremist end of economic conservatism, especially those related to workplace relations, social welfare and all manner of government regulation and market intervention.

Political centrists do not warm to Maurice Newman, and certainly his campaign for an even harsher budget caused a furor from the political Left. He has been accused of waging a war on the working poor, on the unemployed, and on the disenfranchised.

But some of Newman’s  interesting views on industry development and R&D tax policy in the age of corporate entitlement got lost in all the shouting.

Newman’s speech to CEDA earlier this month is revealing, given he is the Prime Minister’s primary economic adviser. For the tech industry, which has been shell-shocked by the severity of cuts to industry assistance, Newman’s speech offer some clues as to where the thinking comes from.

Certainly it helps explain why the Innovation Investment Fund (IIF) program and Commercialisation Australia were wiped from the landscape. It also explains why R&D tax concessions and other tax-related support programs are in trouble. And the end of  federal NICTA funding too.

This was a defence of Joe Hockey’s deeply unpopular budget and his comments on innovation policy need to be taken in that context. But there were some intellectually defensible positions presented by Newman. These should form part of the discussion of industry is currently having about what went wrong for us in the budget.

For me, Newman leans too heavily on his premise that too much research effort in Australia is put into non-commercial (or ‘pure’) research projects and that somehow these projects are a waste.. This misses the point.

Sure, we’re crap in this country at commercialising the results of research (and Newman produces some unflattering numbers to support this). But the answer here is surely that we need to get better at commercialising things,  rather than reducing or stopping the research that feeds it.

Newman laments “corporate welfare” in innovation, and yet says government may be forced to pour more dollars into the local Venture Capital industry. This is a good thing, I suppose. But it’s weird, because that Hockey’s budget killed the IIF without putting in place something to replace it. And that’s a problem.

The term “corporate welfare” in relation to some of the R&D programs is neither unkind nor inaccurate, and the behavior it describes deserves more open discussion. For example, given Google makes almost no tax contribution in Australia, does it really make sense that they are allowed to claim tax credits in this country?

I am late to this, so apologies to those that have already read this speech. Rather than trying to read the tea leaves in the speech, I have reproduced the relevant parts here.

There are some fascinating observations in this.

“Australia is a creative and innovative country. Our Nobel Laureates in science and medicine alone are quite disproportionate to our population. Companies like Cochlear and CSL are testament to our capabilities. Yet, when it comes to translating patents into commercial success, we are ranked 116th out of 142 countries. According to the OECD, we are also last out of 23 countries for collaboration between researchers and business. This is a concern because innovation is a major driver of productivity.

“Australia currently spends around 2.2 percent of GDP on research and development but, according to the Chief Scientist the percentage is falling. If the proposed Medical Research Future Fund is established, this decline should at least be arrested. However, it is clear we must get a bigger bang for our buck. Too many taxpayers’ dollars seem to find their way into fundamental investigation and not enough into business facing research.

“The gatekeepers responsible for awarding grants must re-order their priorities.

“The approach of successive governments to R&D has been unhelpful to the process of local innovation. Tax incentives have waxed and waned depending on the government and the fiscal circumstances of the day and execution has been fragmented. Projects have been started and cut before they have a chance to complete. Regulatory barriers have added to costs and deterred commercialisation. Time taken by agencies to validate discoveries is often the difference between success and failure. It also serves as a disincentive to other researchers.

“The culture of regulatory agencies is in need of radical reform. They, too, need to be more economically aware and must understand that they play an important and, at times, critical role in Australia’s international competitiveness.

“The Treasurer is right to point out that R&D allowances have been a form of corporate welfare and that business tends to default to government funding if taxpayers’ money is available. However, Australia’s venture capital market urgently needs a jump-start to leverage its repository of creative human capital and until the infrastructure and cultural arrangements are in place, government may have to pro-actively lead the way.”

I find many of Maurice Newman’s views on social welfare and on workplace relations jarring and unhelpful. It’s not just the austerity of his views’ bottom line, but also the conservatism of its underlying social philosophy that make them too extreme for an Australian context.

But when you apply this same brand of conservatism to business welfare and industry development schematics, you get some mixed results, but certainly ideas worth a further look.

Certainly his view on the waxing and waning of government assistance and the fragmentation of different programs and their regulation is something many in the industry would agree with.

Do you know more? Contact James Riley via Email.

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