On 18 March 2014, the Senate referred the following matter to the Senate
Economics Reference Committee (committee) for inquiry and report by the first
sitting day of July 2015:
The challenges to Australian industries and jobs posed by
increasing global competition in innovation, science, engineering, research and
education, with particular reference to:
the need to attract new investment
in innovation to secure high skill, high wage jobs and industries in Australia,
as well as the role of public policy in nurturing a culture of innovation and a
healthy innovation ecosystem;
the Australian Government's
approach to innovation, especially with respect to the funding of education and
research, the allocation of investment in industries, and the maintenance of
capabilities across the economy;
the importance of translating
research output into social and economic benefits for Australians, and
mechanisms by which it can be promoted;
the relationship between advanced
manufacturing and a dynamic innovation culture;
current policies, funding and
procedures of Australia's publicly‑funded research agencies,
universities, and other actors in the innovation system;
potential governance and funding
models for Australia's research infrastructure and agencies, and policy options
to diversify science and research financing;
the effectiveness of mechanisms
within Australian universities and industry for developing research pathways,
particularly in regards to early and mid-career researchers;
policy actions to attract, train
and retain a healthy research and innovation workforce;
policy actions to ensure strategic
international engagement in science, research and innovation; and
policy options to create a
seamless innovation pipeline, including support for emerging industries, with a
view to identifying key areas of future competitive advantage.
On 24 March 2015, the Senate extended the reporting date to 10 August
2015. On 15 June 2015, the committee received a further extension to report by
15 October 2015. On 19 August 2015, the committee tabled an interim report on
the inquiry. The same day, the Senate granted the committee an extension to
report by 25 November 2015. On 23 November, the committee was granted a further
extension to report by 15 December 2015.
Conduct of inquiry
The committee advertised the inquiry on the Senate committee's website
and in The Australian, calling for submissions from interested
parties to be lodged by 31 July 2014. The inquiry received 183 public submissions
and two confidential submissions. The public submissions are listed at Appendix
The committee held the following public hearings:
8 October 2014 in Newcastle;
22 April 2015 in Sydney;
27 July 2015 in Brisbane;
3 August 2015 in Melbourne; and
24 August 2015 in Perth.
Additional information including questions taken on notice is at
Appendix 2. A list of witnesses who appeared before the committee is at
This report should be read in conjunction with the committee's interim report,
which includes an issues paper authored by Professor Roy Green.
In accordance with Senate Standing Order 25(17), the committee appointed
an expert consultant to assist the committee in its inquiry. The committee
assessed a number of suitable candidates for the position who had specialist
knowledge of innovation policy. Professor Roy Green, Dean of the UTS Business
School at the University of Technology Sydney, was subsequently contracted as
an expert consultant to the committee.
The expert consultant report produced by Professor Green for the
committee is published with this committee report at Attachment 1. Professor
Green's report is an important document which explores current innovation
challenges and identifies key drivers for Australia's innovation future.
The committee would like to thank Professor Green for advising the
committee throughout the course of the inquiry. The committee takes the view
that Professor Green's report is a significant piece of work which makes a
major contribution to the debate on innovation in Australia and provides
important insights and potential strategies addressing Australia's innovation
The committee also acknowledges the work of Adjunct Professor John
Howard who provided research support to Professor Green's report.
The committee thanks all those who assisted the inquiry, especially
those who made written submissions and those who provided evidence at committee
Why innovation matters for Australia
Innovation has consistently been acknowledged as a fundamental driver of
productivity and economic growth which can deliver positive social and
environmental outcomes by peak international bodies, key industry stakeholders,
government and academia. This view was repeatedly emphasised throughout the
course of the inquiry.
It was also highlighted in the committee's interim report.
Furthering the notion of innovation as a global imperative, the Chief
Scientist for Australia, Professor Ian Chubb, made the point that:
Nations at all levels of development have therefore put a
premium on boosting innovation potential, through the quality of their
knowledge infrastructure. Many have strategies that target public investment to
identified areas of priority and comparative advantage.
In a recent report focusing on innovation strategy, the Organisation for
Economic Co-operation and Development (OECD) highlighted that new sources of
growth are 'urgently needed to help move toward a stronger, more inclusive and
sustainable growth path following the financial crises'. It was also noted that
innovative economies are more 'productive, more resilient, more adaptable to
change and better able to support higher living standards'.
Innovation has also had a positive impact on Australia's economy
'with strong relationships demonstrated between innovation and
productivity growth, firm competitiveness and trade'.
The Business Council of Australia (BCA) advised:
Analysis covering the 10 years to 2005 showed that almost
two-thirds of Australia's productivity growth was driven by innovation. A key
determinant in lifting our productivity performance going forward will be how
effectively we unleash innovation.
Arguments in support of a government role in facilitating innovation are
related to observations about the importance of innovation. Charles Sturt
University argued that the private sector underinvests in innovation (or research
and development) because of the spill-over effects that others benefit from
(i.e. the shared returns from such investment outweighs the private returns).
The OECD has stated:
Undoubtedly the capability to innovate and to bring
innovation successfully to market will be a crucial determinant of the global
competitiveness of nations over the coming decade. There is growing awareness
among policymakers that innovative activity is the main driver of economic
progress and well-being...there is a realisation that a co-ordinated, coherent,
'whole-of-government' approach is required.
Nevertheless, the Australian Academy of Technological Sciences and
Engineering (ATSE) made the point that Australian industry 'must be prepared to
embrace innovation and research'.
The Department of Industry noted that innovation required 'sustained effort'
from both private and government sectors':
...not only to invest in new ideas, but to build capacity to be
able to execute those ideas. Where there are market failures, government is
well placed to assist and facilitate improved economic outcomes.
The view that innovation is a national imperative was expressed by the
cross-section of witnesses to the inquiry including universities, industry,
government and the broader society. The need to provide greater opportunities
to improve access to research and development (R&D) for knowledge intensive
industries in the areas of global growth and the role of government in driving
and supporting innovation were recognised as key aspects to transforming
Australia into an innovation society. With over 60 per cent of Australia's
productivity growth due to innovation, it was made clear during the inquiry
that Australia's future prosperity relies in part on the ability of the
country's innovation system to translate R&D outputs into innovative new
products and services to enable Australia to remain internationally
A case in point is that of the Newcastle and Hunter region of NSW. The
region is home to Australia's largest regional economy with an output estimated
at $36.9 billion in 2012. While the region's traditional strengths exist in
industrial and minerals, its future lies also in 'growing the creative and
knowledge based industries which will support the Hunter's socioeconomic
In this regard, the importance of regional innovation ecosystems was
highlighted in evidence as a key mechanism through which university-industry
collaboration can be achieved. The Parkville precinct in Melbourne was
described as one such example of a thriving regional innovation ecosystem in
the biomedical and health sciences space.
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