Greater than the sum of our ambitions? The ‘Ambitious Australia’ report and Australia’s industrial and innovation future

Brendan Shaw

Source: freepik.com

The release of the Ambitious Australia report, commissioned by the Australian government, is the latest episode in an ongoing policy debate that has been running at least as far back as the Second World War.

The report, led by Robyn Denholm, Chair of Tesla, is a review of Australia’s industrial and innovation system and the structural economic issues the country needs to confront It provides a roadmap for the government on what should be done.

Australia’s relative lack of industrial and innovative development, its limited success in commercialising its research capabilities, and over-reliance on low-value-added, commodity-based exports have been identified as long-term economic problems.

The debate, recently renewed in Australia after the Covid-19 pandemic and geopolitical tensions, has again focussed attention on Australia’s longer-term economic and productivity problems. The Ambitious Australia report recommends measures to diversify and transform the economy by encouraging more research and innovation and better capitalising on Australia's existing advantages.

The industrial and innovation policy debate has had a familiar pattern over the last half century or more. Typically, Australia enjoys years of easy prosperity exporting minimally transformed products and services, before a crisis of some sort – be it a war, a pandemic, an economic downturn, or whatever – bursts the bubble that has supported Australia’s complacency and dependence on commodities. This triggers concern about our economic prosperity, resilience, economic diversity and sovereignty. Often this then leads to introspection and a report with recommendations on what needs to change.

With a few notable exceptions, what then usually occurs is that the impetus for Australian governments, business and society to implement these strategies falters once the crisis has passed, the next commodity boom starts, or the established political interests that support the existing order manage to stifle reform. The old complacency in Australia reasserts itself, the industrial and innovation policy strategy loses priority, and policy attention shifts to other urgent 'here now' issues and Australia returns to a dependence on low-value added commodities and a few service industries.

There is a sense of déjà vu to this, and you can read what I’ve said earlier about it here.

A result of this to and fro in the debate - crisis, panic, neglect - has led to a proliferation of reports to the Australian Government about what to do. These include the Crawford Report (1979), the Espie Report (1983), the LEK Emerging Exporters report (1993), the Karpin 'Enterprising Nation' Report (1995), the Mortimer 'Going for Growth' Report (1997), the Cutler 'Venturous Australia' report (2008), the Ferris 'Australia 2030' report (2018) and the latest, the Denholm Ambitious Australia report (2026).

To varying degrees, most of these reports over the last 40 or 50 years or so have more or less said the same thing:

• Australia relies too much on low-technology commodities for its income

• There are structural problems in the economy, business and government that prevent the country from capitalising on its research and development excellence

• The country needs to do more to build small, medium and large innovative businesses

• Australia needs to invest more to grow our science and research efforts, build our skills base and expand capability in the business sector

• More needs to be done to promote better collaboration between the research sector and industry

• Australia's innovation system and policy initiatives are fragmented and need better coordination

• We need to do more to internationalise the economy to capitalise on our strengths and opportunities to drive economic growth and productivity, and

• Australia needs to develop an outward-looking industrial and innovation policy framework that supports these efforts.

It’s an oversimplification, but most of these reports would have delivered variations on these sorts of findings over the last 40 years or more.

While there have been some notable exceptions, in many cases the long-term implementation of a strong innovation and strategic industry policy agenda has been lacking in Australia.

Ambitious Australia report

It’s against this historical backdrop that the Ambitious Australia report was released a few weeks ago. So, how does the report stack up?

The Ambitious Australia report makes an important contribution to the industrial and innovation policy debate and plays a key role in providing a roadmap for the Australian government. It has many good things in it.

For a start, it's focus is on industry development, innovation and research. For a report about Australia's economic future, this is important. There is a recognition in this report that developing Australia industrial innovation and research sectors is critical to the country's broader economic development and productivity growth.

Some of Australia’s most serious long-term structural economic problems stem from our failure to commercialise technology and innovation, connect with the global economy, and work better together across different sectors to internationalise our economy. All of this has been coupled with a general complacency in the economy and policymaking circles about Australia's long-term prosperity and economic future.

This is now all coming home to roost and none of this is new. Many of these issues in Australia have been around for decades.

However, the Ambitious Australia report is timely and, while heard before, it is excellent these issues are again getting the policy attention they deserve.

The recommendations in the report that the Prime Minister and other ministers need to be involved and lead this agenda are welcome. As previous history shows, policy change like this needs to be made a priority in government and kept on the agenda. The recommendations for strategic coordination across government are excellent, as this is critical for the longevity of a long-term policy of structural change.

The report recommends an elaborate coordinating structure for government science, industry and innovation policy, capped by the formation of a National Innovation Council, supported by six National Strategy Advisory Councils (NASC). Each NASC is tasked with leading change in six priority National Innovation Pillars targeting key sectors where Australia has advantage:

• Health and medical

• Agriculture and food

• Defence

• Energy and Environment

• Resources, and

• Technology.

Each NASC will be required to develop up to three sub goals with policy initiatives developed to support these sub goals.

The report's proposals for reforming the research and development tax incentive (RDTI) are important. Over the years, the RDTI has been restructured to give mostly small and micro businesses all some money, without being focussed on scaling up Australia’s national business R&D effort and supporting larger companies to invest in R&D (as evidenced by the collapse in BERD over the last decade).

The report's recognition that successful industry and innovation policy is not just about helping start-ups (although vital) but also should also be about supporting larger corporations to scale up and undertake R&D and innovative activities in Australia is critical. Both Australian and foreign corporations operating in Australia need to be part of this. The challenge for some in the political system will be whether they are willing to engage constructively with Australian and foreign multinational corporations to encourage them to invest in Australian innovative manufacturing and service industries.

What more needs to be done with the Ambitious Australia report?

Despite the encouraging directions, there are a few cautionary points worth considering.

Getting the strategy, structure and governance around implementing these recommendations, and driving a broader industry and innovation agenda, is critical. The report’s proposed overall approach is welcome. However, without careful management, policy excellence, and ongoing political priority and oversight, the administrative structure recommended could turn into a bureaucratic mess. There's a lot of administrative infrastructure recommended in the report and, if implemented, will need constructive leadership and management.

As a nation we've talked about these issues for years. We've danced around the problems, commissioned numerous reports, issued various government policy statements, and yet here we are. A quarter of the way through the 21^st century we're still trying to address the problems identified as far back as the 1970s. It's time for action.

The other thing that will be important to success will be to get long-term policy continuity by securing bipartisan and multipartisan commitment across the political spectrum. Too many times, we have seen one government develop a new industry and innovation policy agenda, only for all of it to be trashed upon a change of government. This has then been followed by years of delay while the new government works out what it wants to do in this space, if anything.

The other piece of work that has yet to be done is a more comprehensive assessment of what sorts of policies the Government should adopt in supporting business and industry. While the Ambitious Australia report does a good job of looking at how to coordinate government and business activity in this area and addresses some key industrial policy issues, more work is needed here to build the policy logic and case for a range of initiatives. The industry policy chapter in the Keating Government's 1994 Working Nation statement is one example which could contribute to this. Some of my thinking on this can be found here.

We’ve seen this before

Despite the experience of too many previous such reports not going anywhere, I am hopeful that Ambitious Australia will spark a renewed policy priority for the Australian government. The priority of developing new long-term innovation and industrial policy that supports Australia’s economic, productivity and industrial agenda for future generations is important.

Because we have to. Australia’s complacency and failure to engage in structural transformation, as the Harvard University Atlas of Economic Complexity project noted, has left us on a trajectory of low-growth, low-skill, low-wage, low-productivity economic performance while the rest of the world strives to build new industries, jobs and technologies.

Throughout our history the country has been successful in industries like whale oil, sealing, forestry, wheat, wool, beef, lamb, wine, lobsters, coal, gold, iron ore, liquid natural gas and petroleum. We have also been leaders at times in areas like medical devices, pharmaceuticals, vaccines, cars and automotive technologies, solar panels, defence technologies, aeronautics, financial service, tourism and so on. However, Australia has not maintained a long-term strategy to develop its internationally oriented, high-skill, high-wage, high-innovation businesses and industries. The problems in this are becoming apparent today.

After many decades of reports, reviews, statements, bursts of good policy making, and many false starts, here's hoping this time around we can develop a long-term reform agenda to start driving the restructuring and future development of Australia's economy.

#industry #Australia #innovatoin #industrial #R&D