Goran Roos, Adjunct professor at University of Technology Sydney, explains why advanced manufacturing is an essential feature of ‘economic complexity’ and that “a nation’s potential to create prosperity is a direct function of its economic complexity.”
Australia’s economic complexity has declined over the last 25 years, to the point where it ranked 53 among all countries in 2012. The top three were Japan, Switzerland and Sweden. Losing the car industry is likely to lower Australia’s economic complexity by a further 5-15%. The share of manufacturing in Australia’s economy is likely to be below 5%, compared to Switzerland’s 20%.
Turnbull has tasked new Innovation, Industry and Science Minister Christopher Pyne with making Australia’s economy more innovative, with a statement on innovation to be produced in December. You may recall that not so long ago Pyne threatened to dump funding for the National Collaborative Research Infrastructure Scheme, which employed 1700 scientists and technicians in research labs around the country.
Pyne has now been given a different song sheet.
A first step has been to appoint veteran venture capitalist Bill Ferris to spearhead the Turnbull government’s sweeping innovation agenda. He will:
- advise Prime Minister Malcolm Turnbull, Treasurer Scott Morrison and Industry, Innovation and Science Minister Christopher Pyne on how to make technology, innovation and start-ups a new pillar of the economy.
Pyne has described three pillars to the innovation agenda.
First there will be a broad review of the taxation system, not just a tweaking.
- Changes to research and development tax concessions, relaxing capital-raising rules to allow “crowdfunding” from retail investors via the internet, expanding tax breaks for “angel investors” in new start-ups, and copying hi-tech leaders such as Israel and Singapore that subsidise employment in innovation, are all on the table.
Second, there will be a new role for the CSIRO:
- The agenda would also include a bigger role for CSIRO in forging closer ties between researchers and business and in funding commercialisation and start-ups, a direction in which chief executive and former entrepreneur Larry Marshall is already taking the agency.
Third there would be:
- a change in the way universities and academics are funded to make part of their funding dependent on engaging with industry and successfully creating start-ups from their research.
Given the state of our budget, the transformation of Australian industry is to be accomplished, I gather, without spending net dollars, a task which Bill Ferris himself has described as “very challenging”.
Nevertheless there is a bit of money around, it’s a matter of harnessing and directing it. One barrier is to get ideas commercialised at all. Another is to turn $5 million companies into $500 million companies, what the Germans call their Mittelstand. Ferris says there are thousands of companies out there who can do a lot better.
It turns out that the CSIRO has $100 million left from the $450 million it got out of protracted patent litigation over its invention of Wi-Fi. With other venture capital funds there could be a billion dollars available by the middle of next year. When you think of ARENA with funding of $9 billion, a mere billion doesn’t seem a lot. We haven’t heard anything about the $20 billion Medical Research Future Fund recently.
Nevertheless, potentially there is any amount of funding available from the two trillion dollar superannuation and managed funds industry. Confidence needs to be established, with mentoring an essential feature. People with bright ideas typically lack the necessary business and entrepreneurial skills to make a company fly.
One of our problems is that our investment in basic research is inadequate. The grant system is such that researchers struggle to live a normal life, where you get married, have kids and a mortgage. As a result many of our best go overseas for more stable jobs. Funding a new innovation agenda without more money may lead to distortions which make the situation worse.
I have to say, however, that Turnbull is showing an appetite for policy bravery. It remains to be seen whether he can lead us to the promised land.
6 thoughts on “Innovation and economic complexity”
Noble aims – but three decades too late.
The completely irrational hatred of Australian manufacturing will go down in history as being as stupid as the Dutch tulip mania, witch burning and the English South Seas Bubble.
Now that Australian sovereignty has been exchanged for coloured beads and bottles of fire-water in the recent “Free(??)” Trade Agreements, there are all sorts of powerful interests which now have licences to stifle innovation here. Why should they lose money by allowing the Australian mugs to develop anything that will compete on the market against the rubbish they can off-load here?
A resurrected Australian manufacturing industry would be nice – we could start with brand-new state-of-the-art plant and equipment and without being hindered by all the old ways of doing things and without the abominably high costs of setting up in the same old locations.
Fat chance that will ever be allowed happen.
Still, if you don’t dream, you won’t plan – and if you don’t plan, you’ll never get anything done..
Remember Barry Jones and Sleepers, Wake!
Bob Hawke and John Button didn’t know what to do with him.
Brian, in terms of overall economic impact (though not yet in terms of lives lost- I hope! ), I put the failure to best utilize the extraordinary talents and vision of Barry Jones as much worse than the effects of Cyclone Tracey and Cyclone Larry combined.
I remember at the time being not very impressed with Barry. Saw him as too much gee whiz.
At the time (1981) I was a research coordinator for AMIRA, a unique Australian organization that sets up and organizes research projects that are cooperatively financed by a number of mining companies. (The supporters varied from project to project.) The projects ranged from very practical short term things things though to pure science that may produce benefits in the long term by increasing understanding of what is going on.
I would have said both now and then that Australia had a very good reputation for innovation in the mining industry. There were a number of reasons why mining research worked in Australia.
Firstly, our mining industry is large by world standards.
Secondly, the cash flows are large. Very small increases in things like product recovery are worth millions.
Thirdly, mining companies compete by getting better deposits. This means that they all gain if cooperative research manages to let them all improve recovery, improve safety etc.
In the technical part of my career I didn’t find it difficult it all that difficult to good ideas implemented. Once again this was partly because small improvements were worth a lot of money.
Other industries can be different For example, Google and their ilk survive by innovating and developing at an enormous rate.
It is difficult to sort out to what extent good ideas are lost because of lack of funding or simply because the researcher complaining simply isn’t doing good stuff that fulfils a need.
One important thing about research is that most of it doesn’t have to be done in any particular country. If we want more research in Aus we need the tax concessions etc that make Aus attractive and Australia a good place to live for the sort of people who do good research.
John, I understand that about half of the world’s mining technology has been invented in Australia.
Part of Barry Jones’ problem was that John Button and other senior economic ministers didn’t take him seriously.
John D. Thanks a lot for that concise overview of mining research. My apologies for not responding much earlier, (no excuses).
I do suggest that there are a lot more reasons good ideas are lost, across all fields, goes beyond lack of funding and beyond mediocrity. The list of reasons many good ideas don’t see the light of day in Australia reads like the list of blunders that allowed the Imperial Japanese Navy to bomb the daylights out of the Yanks at Pearl Harbour. Worse yet are the good ideas that are snapped up by out trade competitors through our own stupidity, our lack of vision, our timidity: the Sarich engine, Scramjet, Metalstorm, etcetera ad nauseum.
Comments are closed.