Innovation and productivity forgotten in a wasted decade

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By Peter Robert

I have lost count of the number of Prime Ministers who have claimed to be working to make Australia a smart country, a creator of innovative things.

Well, guess what, it’s all been wind and good intentions – we’ve become less innovative year after year throughout the life of this federal government.

Nine years ago when the LNP came to power in Canberra, we as a nation were spending over two per cent of GDP on measurable R&D (it’s notoriously hard to measure) and the trajectory was up.

This put us in a group of intermediate and advanced countries, a huge increase from the 1990s when we were spending closer to 1%. Since then, the trajectory has been downward.

Today, the latest OECD data (March 2022) shows that we even broke out of the top 20, becoming the 23rd biggest R&D spender at 1.80% of GDP.

This is far behind and even further behind the leaders – unsurprisingly led by Israel with 5.44%, Korea with 4.8%, Taiwan with 3.64% and Sweden with 3.53%.

The average spending of OECD countries is the red bar on the graph below of 2.68%, which is 50% more than Australia.

According to Professor Roy Green: “Australia barely makes the top 25.

“If this problem is not solved, we should get used to slow productivity growth and stagnating wages.”

It all really depends on government policy. We’re not spending enough and we don’t have the policy parameters we need to reverse our innovation deficit and decline.

We had an easy-to-understand policy position in the early 1990s – a universally available 150% tax deduction on R&D that sent a clear message to businesses that innovation was essential and valuable.

Today, we have a hodgepodge of hard-to-access tax breaks that only benefit SMEs and a myriad of well-intentioned, poorly executed and undersized subsidy programs.

Then there is the lack of national institutions that drive and coordinate innovation – policy and winners are defined by those in ministerial cabinets and a revolving door of ministers.

Only well-funded and independent institutions will have the power to make decisions for the public good over time rather than reacting to fashion and the cycle of news.

Japan has just announced a program which shows how undersized and dispersed our policy is.

Japan has officially launched its first national endowment fund for universities – a 10 billion yen ($82 billion) fund that is the largest of its kind in the world and, according to those now in charge of managing it, a clear recognition that the country urgently needs to take innovative competitiveness more seriously.

The creation of the fund, along with plans to create a “university of excellence”, are part of a number of efforts built around the idea that Japan desperately needs to create a financial, structural and regulations conducive to innovation.

And, a repeated argument in different branches of government, it should be aimed at solving the problems that Japan, as the fastest aging society in the world, faces.

Oh, we could wish for more of the same thought.

Photo: March 22 OECD Main Science and Technology Indicators Database

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