Dr Brent Jackson

28 April 2014 — The announcement of a senate inquiry into Australia’s innovation system is an opportunity to insist the Federal Government put sustainability front and centre, according to Australia’s peak engineering body.

Dr Brent Jackson, executive general manager public affairs at Engineers Australia, told The Fifth Estate that while the sustainability challenge was a source of significant impetus for innovation, there were some crucial barriers that must be addressed.

“Innovation will be critical to ensuring that Australia enjoys sustainable growth in our standard of living and quality of life, and while a lot is being achieved in this country, our achievements and contribution to innovation are often hidden or treated as an after-thought in policy decisions,” Dr Jackson said.

Asked to what extent sustainability is creating opportunities, Dr Jackson pointed out that innovation was “at the heart of what engineering is all about”.

“In its most basic form, engineering is the application of scientific principles to solve real-world problems. In a world with finite resources, if we’re going to see real and sustainable growth we’ll have to find ways of doing more with less, and this is essentially the definition of engineering,” he said.

“Sustainability will undoubtedly drive a huge amount of innovation and, consistent with the old adage of “necessity being the mother of invention”, it’s now clear that if we are going to continue to develop and prosper as a society, we’ll have to do things differently and more efficiently.

“Innovation will be a fundamental part of achieving sustainable outcomes in the built environment. Twenty or 30 years ago the concept of a carbon-neutral building wouldn’t have even been on our radar. Today, issues of sustainability are often the very first considerations in the planning process. It’s only the innovation of engineers and other design and construction professionals that’s made these concepts commonplace and accepted as part of mainstream thinking.”

The battle for funding

The Fifth Estate asked if the reduction of funding to bodies such as CSIRO and proposed changes to tertiary funding will support or discourage innovation.

“There’s no doubt that reduced funding makes innovation a harder proposition,” Dr Jackson said.

“Nonetheless, we shouldn’t discount the role that non-fiscal measures play in innovation, and there are a range of regulatory settings that must also be in place if we want to build a culture of innovation in Australia. For example, government could give consideration to reviewing the patent application process, and policy makers also need to ensure that it’s as simple as possible to access existing support and funding initiatives.”

Broad terms of reference

Broadly the Senate Economics References Committee inquiry into Australia’s innovation system aims to examine the challenges to Australian industries and jobs caused by increasing global competition in innovation, science, engineering, research and education. Specific matters raised in the terms of reference include:

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

Current policies, funding and procedures of Australia’s publicly funded research agencies, universities and other actors in the innovation system

Policy actions to attract, train and retain a healthy research and innovation workforce

Policy options to create a seamless innovation pipeline, including support for emerging industries, with a view to identifying key areas of future competitive advantage

Where the gaps are

In considering the terms of reference, specifically what should be done to improve innovation in Australia, Engineers Australia has identified key areas where existing policy measures are lacking.

Dr Jackson said reform of Australia’s intellectual property laws was necessary. This was an area identified in the Cutler Review, Venturous Australia, which was released in 2008 after the last inquiry into the innovation system, which was instigated by Labor’s then-minister for science, technology and innovation, Senator Kim Carr.

“Though large numbers of businesses are using IP laws to protect their innovative activities, the Cutler Review found that these laws can also have an inhibiting effect. This generally occurs when IP rights are granted too easily or are ambiguously defined, making it difficult to discern what innovations might already be subject to patent,” Dr Jackson said.

Engineers Australia also said that stabilising tax incentives for innovation and creating a long-term incentive regime was required to deliver more certainty in the innovation process, especially given the frequently lengthy period between concept and commercialisation.

Dr Jackson noted other incentives with the potential to support innovation include taxation holidays for profits generated by commercialised ideas, higher depreciation rates on capital assets required in the innovation process and tax incentives for individual researchers.

In terms of government organisations and incentives, Dr Jackson identified that currently each organisation often focused on just one stage in the process.

“Streamlining the delivery of grants and other support for innovation would make the process more accessible. Emerging companies are often small and under-resourced – creating a single point-of-contact and simplifying access is a simple step to that would reduce transaction and access costs and assist companies greatly,” he said.

“Making the capital environment more attractive would encourage private investors to take on a greater share of the risk involved in financing in innovation. This could be done by providing tax concessions to venture capital organisations and financial institutions involved in commercialising innovative products. Attracting investment from overseas would also significantly increase the available pool of finance for innovative organisations.

“An increased focus on encouraging collaboration between businesses and universities, TAFEs and other publicly funded organisations such as the CSIRO is [also] highly desirable.

“Small-to-medium enterprises, in particular, are often unaware of the benefits that can be gained through collaboration, let alone the assistance and facilities available through research organisations.

“The CSIRO and its programs make a significant contribution to collaboration. They are also an important development in setting research directions and committing longer term funding to them. Government support for such activities needs to be maintained and not curtailed due to fiscal pressures.

“The Cooperative Research Centres program is another government initiative that is an important medium for collaboration between researchers in the public and private sectors and end users.”

The government as consumer should let the dollars talk

Dr Jackson said that a stronger focus on innovative goods and services in terms of government procurement would deliver benefits.

“Innovation often originates through the needs of consumers, and government procurement is no exception,” Dr Jackson said. “As major purchasers of goods and services, governments can directly support innovation by implementing a long-term planning framework and ensuring that they have the capacity to make informed procurement decisions.

“Informed clients and consumers have an important role in encouraging innovation. Knowledgeable clients support competition and innovation through informed purchasing and demand for new and improved products and services.

“According to the OECD, one role of government is to be involved in the development of consumer awareness and education programs that help to equip consumers to become active participants in the innovation process and enable them to make informed choices. This may include programs that seek to overcome issues such as behavioural biases, reluctance to accept new innovations, and purchasing products and services on the sole basis of price.

“Governments are also key clients to many businesses and can have a significant effect on driving innovation through their purchasing power. The public sector is in a strong position to promote innovation by being an informed and demanding buyer, and positively, the Australian Government has committed to fostering innovation through its purchasing choices.”

Climate change – innovate or perish?

Venturous Australia identified climate change mitigation and adaption as a key innovation priority.

The report states: “Australia has a disproportionate global share of environmental challenges. These range across water and land management, salinity and threats to marine ecosystems such as our coral reefs, weather volatility, bushfires, and coastal degradation. Addressing these challenges in the years and decades ahead must remain one of our highest national priorities. As the Garnaut Report on climate change has highlighted, Australia needs to invest more heavily in innovation and technology-based solutions to address many of these challenges, and to build local capability and skills to deploy innovative solutions. There will be significant global markets for Australian-generated solutions.”

Six years after this recommendation was made, it would appear there is still a need for the government to allocate more resources to enable the challenge to be met.

No innovation = no growth

When asked whether the Australian engineering sector was receiving sufficient support in the form of research funding, skill-building opportunities and support for prototypes and pilots in terms of sustainability innovations in the areas of materials, structural design for sustainable buildings, renewable energy, water resources and sustainable transport, Dr Jackson pointed out that innovation was the key to any kind of economic growth, sustainable or otherwise.

“In the absence of sustained innovation, the rate of growth in labour-constrained economies will ultimately fall to zero. Innovation can drive productivity improvement across all industrial sectors,” Dr Jackson said.

“Many industries essential to Australia’s economic wellbeing – such as construction, mining, telecommunications and manufacturing – are underpinned by engineering expertise that is driven by the innovation process.

“The expertise of the engineering profession is vital in converting innovative ideas into reality for everyday use. However, engineering, like innovation, can’t simply be treated as a basic input or a commodity – it’s a highly complex and interactive process.

“A commitment to innovative outcomes requires a commitment to action and a firm decision to allocate time and resources. This will undoubtedly require a shift in thinking away from innovation as a cost, to instead considering innovation as a benefit (or yield) of investment.

“While additional financial investment would certainly be a welcome move, we need to be clear that money in itself will not drive innovation.

“While many public debates around innovation focus on the necessity for greater investment or regulatory assistance, there is also much that can be done through non-monetary or regulatory means, and these are often overshadowed by ‘big-ticket’ proposals and high profile policy initiatives.

“For example, government can play a strong role in increasing the focus on collaboration between businesses and publicly funded organisations such as the CSIRO. Simply bringing likeminded organisations together can represent a major breakthrough in its own right, and this is an area where government can take a clear leadership role. Strategic linkages between organisations with complementary skills and competencies are a critical factor in successful innovation systems. These networks facilitate the generation and commercialisation of new ideas.”

And now for the good news

The good news is Australia, while having a low rate of investment in research and development, has proven strengths in design and engineering.

“In an increasingly globalised world, the innovative products of Australian companies are being recognised and sold worldwide. We’ve proven that we can successfully compete in a world market in areas of high-tech, high-value manufacturing and design,” Dr Jackson said.

“Clearly, Australia can no longer compete in traditional areas of high-volume, low-margin manufacturing, but increasingly we’re seeing Australia emerge as a recognised player in high-end design services. It’s areas that require a highly educated workforce – one of Australia’s strengths -– where we’ll see real and sustainable grow into the future.

“Engineers Australia strongly believes that fostering a culture of innovation will be a critical and essential factor in Australia’s transformation from a resource-dependent economy to a high-tech, knowledge-based economy. The expertise of the engineering profession is vital in converting innovative ideas into reality, but we need to recognise that innovation, like any policy priority, needs to be backed by action and investment.

“[We] would be pleased to see the inquiry go some way to better promoting the role of innovation in Australia and the benefit it provides to our economic, social and environmental wellbeing.”

Submissions to the Inquiry into Australia’s Innovation System are being accepted until July 31 2014, with the committee due to report on the first sitting day of July 2015. Submissions can be lodged here.