Australia needs a new innovation policy...now
Tuesday 5 August 2014
Australia is in urgent need of a new National Innovation Policy to ensure we have a highly dynamic and modern economy in the future, according to a parliamentary submission lodged by the Australian Private Equity and Venture Capital Association (AVCAL).
In lodging its submission to the Senate Inquiry on Australia's Innovation System last week, AVCAL highlighted the need for policy reforms to recognise that innovation is not just about research, but about the translation of that research into usable and productive outcomes.
"Over the years successive governments have looked at various ways to strengthen university-industry linkages to help stimulate innovation," AVCAL Chief Executive Yasser El-Ansary said.
"We know what we have to do, but unfortunately we’ve continued to ignore the ‘development’ side of ‘research and development’. We have to recognise that supportive innovation policy systems play a critical role in taking research from the laboratory to the marketplace, and this is particularly true for small- and medium-sized economies like ours."
In past years the Commonwealth Government has spent around $9b annually supporting research and innovation, with a heavy emphasis on research and industry assistance. The little known fact is that less than 1.5% of this budget has been dedicated to supporting the translation of research into commercial outcomes. “Given the very small investment we make in supporting translation, we shouldn’t be surprised at our relatively poor performance when it comes to commercialisation rates from research in Australia,” said Mr El-Ansary.
Private investment through angel, venture capital and private equity funding plays a vital role in helping to take such innovative businesses to the next level. The Financial System Inquiry's interim report in July 2014 acknowledged this, stating that, "venture capital and private equity funds tend to finance more innovative and high growth firms. These firms are drivers of long-term productivity growth".
"As an economy, we know that we have to lift our game around productivity, and we have to take decisive action to set ourselves up for enduring prosperity," said Mr El-Ansary. Australia needs a newly-developed National Innovation Policy to capitalise on the valuable (and mostly publicly funded) research it already generates in science, technology, engineering, medical science, and other advanced technologies.
AVCAL's key recommendations to deliver a productive and self-sustaining innovation system in the long-term include:
- introducing a dedicated translational innovation programme with a long-term focus. This should include a new $500m translational innovation fund to attract matching private capital into high-risk but high-potential early stage companies looking for commercialisation assistance, and a new translational medical innovation fund funded from 10% of the proposed $1b endowment of the Medical Research Future Fund;
- delivering a consistent tax outcome for all investors in private ventures and SMEs through Venture Capital Limited Partnerships;
- improving existing migration policies to better target innovation-building;
- introducing quarterly R&D tax credits for early stage companies;
- reforming the Employee Share Scheme tax framework for early stage companies; and
- strengthening the nexus between publicly-funded research and economic outcomes.
Separate to the Senate Inquiry, AVCAL has also been advocating for policy changes to be made by the Government as part of the highly anticipated National Investment and Competitiveness Agenda, which is due to be released in the coming months.
A full copy of AVCAL’s submission to the Senate Inquiry on Australia's Innovation System can be viewed here.
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Author: Adrian O’Shannessy, Director, Greenwoods & Herbert Smith Freehills
Author: Dr Kar Mei Tang, Head of Policy and Research, AVCAL