Inquiry in the 44th Parliament
1.1
In the 44th Parliament, the Standing Committee on Education and Employment commenced an inquiry into innovation and creativity: workforce for the new economy.
1.2
The Committee received 70 submissions and held four public hearings in Canberra, Sydney, Melbourne and Brisbane prior to the prorogation of the Parliament.
1.3
The Standing Committee on Education and Employment ceased to exist upon dissolution of the 44th Parliament and accordingly its inquiry lapsed.
Inquiry in the 45th Parliament
Referral of the inquiry
1.4
The Standing Committee on Employment, Education and Training for the 45th Parliament was established on 13 September 2016 under Standing Order 215.
1.5
On Wednesday 9 November 2016 the Committee adopted an inquiry referred by the Minister for Employment, Education and Training, Senator the Hon Simon Birmingham, asking the Committee to inquire into and report on matters that ensure Australia’s tertiary system - including universities and public and private providers of vocational education and training - can meet the needs of a future labour force focused on innovation and creativity.
1.6
The terms of reference differ from those of the inquiry in the 44th Parliament and are set out in the front pages of this report.
Inquiry process
1.7
The inquiry was adopted and announced on 9 November 2016 and submissions from interested individuals and organisations were called for.
1.8
Pursuant to House of Representatives Standing Order 237 the Committee accepted and considered the evidence submitted to the inquiry of the 44th Parliament. This included 70 submissions and transcripts from the following public hearings:
19 April 2016, Canberra – public hearing;
26 April 2016, Melbourne – public hearing;
27 April 2016, Sydney – public hearing; and
28 April 2016, Brisbane – public hearing.
1.9
In addition to the 70 submissions received in the 44th Parliament the Committee accepted and considered a further 33 submissions.
1.10
The Committee held public hearings and inspections as follows:
1 March 2017, Canberra – public hearing.
14 March 2017, Sydney – public hearing ;
15 March 2017, Melbourne – public hearing;
16 March 2017, Brisbane and Sunshine Coast – public hearing and inspections; and,
29 March 2017, Canberra – public hearing.
1.11
Full details of the public hearings can be found in Appendix B.
1.12
The Committee thanks all those who contributed to this inquiry.
Structure of the report
1.13
This report has two further chapters:
Chapter 2 discusses skilling students for the jobs of the new economy. This is an extensive chapter which looks at issues facing teachers, lecturers and students from primary school through to the need for higher education students to benefit from more opportunities for relevant work experience; and
Chapter 3 looks at the higher education and VET sector;
Chapter 4 looks at some of the barriers facing universities, other higher education providers and the VET sector in collaborating with industry. The chapter also looks at ways in which the Australian Government is helping collaborative efforts;
Chapter 5 looks at start-ups and outlines ways in which Australia’s entrepreneurial culture can be further developed; and,
Chapter 6 looks at research collaboration and commercialisation and details some issues around Intellectual Property.
Context of the inquiry and report
1.14
This inquiry and report come at a time when there is a nascent but promising innovation ecosystem in Australia. Many Australian companies are now recognised on a world stage, the technology company Atlassian and the medical devices company Cochlear being two notable examples. It has always been the role of government to support such companies and the research behind their products. In doing so, government must make sure that the policies and programs it implements keep up with the times.
1.15
In December 2015, the Australian Government launched the National Innovation and Science and Agenda report. The report outlined a framework for Australian innovation policy and provides significant national focus and direction in this area.
1.16
The following section outlines the National Innovation and Science Agenda and some of the major policy initiatives that the Australian Government hopes will ‘drive smart ideas that create business growth, local jobs and global success’ In addition it describes recommendations of the review of research policy and funding arrangements all of which were accepted by the government.
The Australian Government’s National Innovation and Science Agenda
1.17
The Australian Government’s National Innovation and Science Agenda is designed to provide a framework for Australian innovation policy. The Agenda’s initiatives are worth $1.1 billion over four years. The Agenda is designed to drive smart ideas that create business growth, local jobs and global success. It focuses on four key pillars:
Government as an exemplar.
1.18
The following section lists some of the main initiatives.
Advancing quantum computing technology
1.19
The government is investing $25 million over five years to support the development of silicon quantum computing technology in Australia by the Centre for Quantum Computation and Communication Technology (CQC2T). Headquartered at the University of New South Wales, CQC2T is a global leader in silicon-based quantum computing research, and investment in its work will help fund the development of a silicon quantum integrated circuit—the first step in developing a practical quantum computing system.
Reforms to Employee Share Schemes
1.20
Employee Share Schemes (ESS) give employees shares or the options to buy shares in the company as part of their remuneration. By aligning the employee’s interests to those of the company, ESS enables employees to share in the success of the business.
1.21
ESS provides an advantage for start-ups as they can avoid paying high salaries when they are the most cash-poor. However, current disclosure requirements can discourage small companies and start-ups from implementing an ESS, because it may result in the release of commercially sensitive information and, the cost to produce the documents is high.
1.22
The new reforms will limit the requirement for disclosure documents given to employees under an ESS to be made available to the public.
Biomedical Translation Fund
1.23
The government has established the Biomedical Translation Fund with more than $500 million—$250 million of Commonwealth funding that has been matched by private sector investors—to be used to invest in commercialising promising biomedical discoveries.
1.24
The Biomedical Translation Fund:
Is managed by three private sector fund managers that were selected through a competitive process to make investment decisions for BTF funds;
Will support the development of biomedical ventures in Australia to achieve significant national health and economic outcomes;
Will help translate good science and research effort into real-life healthcare solutions;
Has attracted $250 million of funding from private sector investors;
Is based on a recommendation of the Strategic Review of Health and Medical Research; and,
Will complement the Medical Research Future Fund and fast-track investments into biomedical innovations.
Changes to Venture Capital Limited Partnerships
1.25
Venture Capital Limited Partnerships (VCLPs) are investment vehicles that provide tax exemptions for those investing in innovative companies at the early and growth stages of a startup.
1.26
At these stages of development, companies will typically have received one or more rounds of initial funding but not yet have the scale and track-record needed to go public or attract buy-in from institutional investors.
1.27
Reforming VCLPs will make them more internationally competitive and will attract greater levels of venture capital investment.
1.28
Under the new arrangements:
A new 10 per cent non-refundable carry-forward tax offset is available to partners in new Early Stage Venture Capital Limited Partnerships (ESVCLPs) for capital invested during the year.
The maximum fund size for new and existing ESVCLPs has been increased from $100 million to $200 million.
The CSIRO Innovation Fund
1.29
The CSIRO Innovation Fund is a joint government–private sector fund that will help Australia’s home-grown innovations become successful businesses. This will create jobs and boost Australia’s productivity and exports.
1.30
The government is investing a total of $70 million into the fund over 10 years alongside $30 million of revenue from CSIRO’s WLAN programme, which has delivered Wi-Fi to the world. The remaining $100 million will be sourced from wholesale private sector investment.
CSIRO ON accelerator programme
1.31
ON is Australia's sci-tech innovation accelerator dedicated to unearthing research and steering it towards high-potential innovative ventures.
1.32
Established by the Commonwealth Scientific and Industrial Research Organisation (CSIRO) in 2015, ON is designed to assist researchers working on science and technology projects that have the potential to shape Australia's future.
1.33
Under the National Innovation and Science Agenda the ON accelerator programme has been expanded to help more publicly funded research organisations to prepare their research for commercial adoption faster.
1.34
ON is especially interested in discovering innovative research to address industry-related challenges in the areas of food and agriculture, advanced manufacturing, medical technologies, cybersecurity, mining technology and energy.
Data61: Australia’s digital and data innovation group
1.35
Data61 is the result of a merger between National ICT Australia (NICTA) and CSIRO’s digital research unit, creating one of the largest digital research teams in the world and, outside of the Department of Defence, Australia’s leading capability in cyber security research.
uses data analytics to connect disparate government datasets and publicly release them on open data platforms;
improves industry cyber security and develops new cyber security architectures;
is building a Data Research Network linking businesses with data researchers; and,
delivers data analytics training to businesses.
Global Innovation Strategy
1.37
The Global Innovation Strategy outlines existing and new initiatives and support for international innovation and science engagement. It can be viewed at industry.gov.au/innovation/Global-Innovation-Strategy.
1.38
Under the National Innovation and Science Agenda the strategy includes $36 million invested over four years to:
Establish five ‘Landing Pads’ in global innovation hotspots to support entrepreneurial Australians. Landing Pads provide market-ready start-ups with a short-term (90 day) operational base where they can access entrepreneurial talent, mentors, investors and a wider connected network of innovation hubs.
Provide seed funding to support global SME (small-to-medium enterprise) -to-researcher collaborations to enable viable projects to grow and test commercialisation through the Global Connections Fund.
Provide funding to assist Australian businesses and researchers to collaborate with global partners on strategically focused, leading-edge research and development projects through the Global Innovation Linkages programme.
Build strong regional linkages in the Asia-Pacific through the Regional Collaborations Programme which will support multi-partner activities that facilitate greater science, research and industry collaboration in delivering innovative solutions to shared regional challenges.
Innovation Connections
1.39
Innovation Connections is an Australian Government programme focussed on getting researchers into SMEs. The programme provides a financial incentive of up to $50,000 a year for two years towards the cost that the SME incurs in engaging the researcher.
1.40
The Innovation Connections initiative drives new industry-led collaborations between researchers and SMEs, which foster the development of new ideas with commercial potential and identify the knowledge gaps that prevent business growth.
1.41
Innovation Connections:
provides access to Innovation Facilitators located across metro and regional Australia so businesses can access innovation infrastructure;
makes matched grants available to support graduate and postgraduate researcher placements in businesses;
makes matched grants available to support business researcher placements in publicly funded research organisations; and,
identifies opportunities for businesses to access research, development and testing facilities and to develop specialised training options by working more closely with the vocational education and training sector.
New research funding arrangements for universities
1.42
Universities have traditionally been rewarded for their research outputs, but to ensure their rate of collaboration with industry increases, universities need to be encouraged in joint endeavours that produce outcomes with commercial and community benefit.
1.43
The new arrangements will replace the current suite of six research block grants with two programmes:
The Research Support program will provide around $879 million in 2017 to Australian universities as a flexible funding stream to support the systemic costs of research.
The Research Training program will provide around $1.01 billion in 2017 to support domestic and international higher degree by research (HDR) students, training the next generation of researchers and innovators.
Research income from competitive grants will continue to drive funding allocation to support excellent research.
Engagement will be measured by research income from industry and other end-users. Publication track record remains an important indicator of research quality which is recognised in competitive grants and rankings.
Student HDR completions will remain as an important measure in determining Research Training funding amounts.
1.44
These changes create simpler, transparent research funding arrangements that continue to focus on quality while increasing incentives for industry and end-user engagement.
Tax Offsets for Early Stage Investors
1.45
From 1 July 2016, people who invest in a qualifying early stage innovation company (ESIC), may be eligible for tax incentives.
1.46
The tax incentives provide eligible investors who purchase new shares in an ESIC with a:
non-refundable carry forward tax offset equal to 20% of the amount paid for their qualifying investments. This is capped at a maximum tax offset amount of $200,000 for the investor and their affiliates combined in each income year
modified capital gains tax (CGT) treatment, under which capital gains on qualifying shares that are continuously held for at least 12 months and less than ten years may be disregarded. Capital losses on shares held less than ten years must be disregarded.
Incubator Support initiative
1.47
As the name suggests incubators help ‘innovative startups to rapidly transform their ideas into globally competitive businesses by giving them mentorship, funding, resources, knowledge and access to business networks.’
1.48
The Agenda states that ‘[M]ore high-performing incubators will mean more start-ups can realise their economic potential earlier’.
1.49
The Incubator Support initiative provides funding through two components to deliver Incubator Support projects, both of which require matched funding from applicants.
1.50
The first is support for new and existing incubators:
to help develop new incubators in regions or sectors with high potential for success in international trade, and
to boost the effectiveness of high performing incubators, including funding support to expand their services and/or develop the innovation ecosystem.
1.51
The second is support for expert-in-residence:
to provide access to top quality research, managerial and technical talent through secondments of national or international expert advisers who will improve their chance of commercial success in international markets.
1.52
Grant funding of up to 50 per cent of total Incubator Support Project Values will be available as follows:
a minimum grant amount of $10,000 and a maximum grant amount of $500,000 for new and existing incubators per project with a maximum grant period of 24 months.
a minimum grant amount of $1,000 and a maximum grant amount of $25,000 for Expert-In-Residence per project with a maximum grant period of 12 months.
Review of research policy and funding arrangements – the Watt review
1.53
On 7 July 2015, the then Minister for Education and Training, the Hon Christopher Pyne MP appointed Dr Ian Watt AO to conduct a review of research policy and funding arrangements (the review). The review, known as the Watt Review, was given the task of developing options to strengthen Australia’s research system and encourage greater collaboration between universities and business and other research end users to enable Australia’s high quality research to be translated into economic and social benefits for the nation.
1.54
The review developed recommendations which in broad terms aim to:
ensure the quality and excellence of Australian university research and research training
allocate funding through Research Block Grants (RBG) in a simpler and more transparent manner
provide incentives to universities to increase and improve engagement and collaboration with business and other end-users
encourage universities to engage in research commercialisation and knowledge transfer with business and the broader community, including through funding incentives and a focus on more effective management of intellectual property (IP)
ensure that competitive grant criteria recognise the quality of the proposal and support the opportunities for commercialisation and collaboration with business.
1.55
On 6 May 2016, the Government announced it has accepted all the review’s recommendations which it felt would build on the measures announced as part of the National Innovation and Science Agenda.
1.56
In addition to recommendations already addressed by the NISA the Minister for Education and Training Senator the Hon Simon Birmingham announced that the remaining recommendations would be addressed in consultation with university and industry sectors and that actions included:
further changes to ARC grants to better suit business;
focusing universities on improving their success rates in competitive research grant applications;
options to increase the number of PhD industry placements;
greater recognition of business experience in university appointments and promotions;
promoting greater access to intellectual property arising from publicly funded research and
an annual assessment of the performance of Australia’s publicly funded research system.