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Interview with Sky News

20 July 2017

Interviewer: 
Jon Dee

Subject: Innovation in Australia, R&D tax incentive

E&OE

JON DEE:     

As we all know, when it comes to growing a business, innovation is vital. But how do we make it easier for businesses to turn bright ideas and innovation into jobs and new income streams? Well, joining me to discuss that is Arthur Sinodinos, the Minister for Industry, Innovation and Science. He joins us live from our Martin Place studio.

Minister, thanks for joining us. Now in your opinion, what do you think are the main benefits of innovation and why is it so important?

ARTHUR SINODINOS:       

Well I think the main benefits of innovation are that it is the key - the long term key - to higher income growth and living standards. It's very important for us to understand as a country, that without innovation, we won't be able to compete with the top tier nations in the world. Innovation is very important in creating new products and processes. And as a country that punches above its weight when it comes to the creation of knowledge, we have great opportunities to commercialise more and more ideas here in Australia. We can't commercialise every idea here, but we can do a lot more to commercialise them. And that is the key to higher living standards in the longer run: higher productivity, higher income, higher living standards.

JON DEE:     

Now that's a good point. And I guess we sometimes hear about Australian ideas going overseas because companies can't find investment funds here in Australia. How do we increase investment into R&D and innovation here on the ground?

ARTHUR SINODINOS:       

Well we're already doing that through things like the R&D Tax Incentive, which is available both for profitable companies, and for start-ups, which don't have taxable income. Or in a loss situation, we have a refundable tax offset for them. Which often means that they can actually stay in Australia, or not have to go to outside sources of capital, longer than might otherwise be the case. A couple of years ago when Malcolm Turnbull became Prime Minister, we increased the number of tax incentives for angel investors and others to promote more venture capital. What we're doing with the R&D Tax Incentive is we've had a bit of an examination of that. I've asked for some further work to be done on how it's working, to make sure it's sustainable going forward. But I'm also looking at the other funds that we provide: the Bio Translation Fund, the CSIRO Investment Fund.

There are quite a few mechanisms, through which we're putting more funding in the way of Australian start-ups and innovative enterprises. I've also noticed in recent times, [audio skips] on behalf of the venture capital industry, where it looks like we're going to reach one billion in venture capital in 2016-17. The super funds are now starting to come to the party more and more, providing funding. We have one of the biggest super fund pools in the world. So that's potentially an even bigger source of funding in the future. So on the funding side, I think the sources are coming together. I think ideas are here. One of the main challenges is bringing the ideas and the entrepreneurs together. And that's when you get new products, processes being developed.

JON DEE:     

Now Minister, Australia is well known for its research. But how do we translate that research into commercial outcomes that create jobs and business opportunities here in Australia?

ARTHUR SINODINOS:       

Well we're already doing a lot to promote more commercialisation. A couple of years ago as part of the first National Innovation and Science Agenda, we increased the incentives for researchers to apply for grants which have more of a commercial bent. So they're not just pure research grants, but ones which have a component for potential commercialisation. We're also drawing together a strategy around university precincts, where we bring industry, academia and various publicly funded research organisations together. And cheek by jowl, that physical proximity is what leads to greater innovation and commercialisation.

I've seen it happen in places like Tonsley Park in South Australia, the Macquarie Business Park here in Sydney, even the Nuclear Science and Technology Organisation are going to be creating an innovation precinct at Lucas Heights. They're going to have the world's first nuclear science and technology incubator, as well as the technology park and a graduate institute for students in nuclear science and technology. So there are a lot of ways in which we are moving the dial and getting greater commercialisation. Still a big challenge. We're not as good as the Americans, the Israelis the Singaporeans; to name some of the top tier countries abroad in this. But we can get there because we've got a base of great ideas.

JON DEE:     

Well we certainly do have a base of good ideas. That's a good point. Now as you know, the economy continues to undergo structural change. How can we build a competitive advantage for our traditional industries?

ARTHUR SINODINOS:       

Well that's very important, what you've put your finger on there. Because traditional industries have a future if they embrace innovation. Manufacturing is an example. Manufacturing has grown in the last 12 months in employment, and output conditions are pretty good, the portents for the future are good. But that's because manufacturing enterprises have been resilient. They've withstood the pressures through the resources boom, including the high exchange rate. And what's happening now is we are putting more resources into encouraging smart manufacturing; using the internet of things, encouraging firms in the auto sector - which may have relied on car assembly - provide them with demand. We've provided, through the Auto Diversification Program, Next Generation Manufacturing Fund, and a down payment in the Budget of another 100 million for an Advanced Manufacturing Fund to help companies - particularly component suppliers - diversify and use the same skills and attributes they had when they were dealing with the car industry in other sectors of manufacturing.

So I think the future for traditional industries is good, as long as they adapt to change. Change is a constant. We can't be King Canute and wish change away. It's happening. We adapt to it, and we're smart, and we use modern tools of innovation to help us have a competitive edge. It's about having a premium. Warren Buffett, when he's investing in companies, he's looking for companies that command a competitive advantage and therefore a premium in the marketplace. An advantage that can't be commoditised away. And that's what we're looking to create for Australian industry.

JON DEE:     

Now are there any online tools that can facilitate that competitive advantage?

ARTHUR SINODINOS:       

Well for example, one of our industry growth centres in the food sector, Food Innovation Australia, has an online tool which brings buyers and sellers together to promote Australian exports of food. And some people have said we've had a mining boom, we're potentially going to have a dining boom. And what Food Innovation Australia is doing is bringing the buyers and the sellers together through online tools. And it's an iterative process. It's also a way of the buyers giving advice on what they think could be improved in terms of seller offerings and all the rest of it. But the important challenge we face is that not enough SMEs in Australia - particularly smaller businesses - have a web presence or an online presence. And that's important to being a full participant in the sort of digital revolution that's going on. So one of our priorities this year - and its work I'm doing in conjunction with the Treasurer - is how we promote more digitisation of small business.

JON DEE:     

And I think it's a very good idea, and we'd certainly encourage that too. Minister, thank you very much for joining us. We appreciate your time.

ARTHUR SINODINOS:       

Great to be with you John. Congratulations.