The Government’s Innovate Australia statement was like the curate’s egg _ good in parts. This means, of course, that as eggs go it is a bad one. Various industry representatives have praised the statement for the sprinkling of goodies that come their way, but the approach of the statement is fundamentally flawed. It is so because it assumes that government can successfully play a significant role in the application of technology in industry.
It would have been better if the Government had concentrated on that part of research and development that industry will rarely if ever do _ expensive pure research and concentrated on creating a better environment for business to apply the technology in a better way. On those counts the few grants to pure science are welcome, but in a general environment of cut-backs to hard science and the theoretical edge of engineering at Australia’s education institutions, it is window dressing while the shelves inside are poorly stocked.
The alternative board at the stock exchange for acknowledged higher-risk investment and relaxation of rules that govern banks’ investment in small-to-medium business are also welcome. However, these rules will apply equally to non-hi-tech new business. And just as previous tax concessions on research and development investment (now to be rightly tightened) were used by the get-rich-quick brigade of financiers, the new investment rules can just as easily fall into the same trap.
The central reason for low investment in research and development is a generally low savings mentality in Australia and a generally short-term, risk-averse outlook by investment houses. The Government has to its credit partially addressed this with its superannuation plans, but has run away from sensible proposals to direct a reasonable proportion to higher-risk hi-tech investment. Sensible long-term investment strategies can overcome the high-risk in individual ventures, by spreading the investment among many ventures, some of which will have very high gains to offset the ones that fail altogether. Of course, cut regulation, further micro-economic reform and more flexible labour arrangements would help hi-tech investment, too.
The other fundamental flaw is that the overall direction of money is out of business and in to vote-buying. The Government will be taking $818.5 million out of Australian business and technology, even if a lot of that is to tighten tax rorts. It will be putting back only $465.5 million into that side of the Australian economy. That leaves $350 million. This will inevitably be used for vote-buying between now and the election. It most likely will go to a myriad of unproductive government “”programs”.
The saving from ending the rorting of the research and development deductions should have gone directly back to business to be distributed in a more equitable way and in a way more conducive to investment in technology. The inevitable transfer of this resource to less productive elements of the Australian economy as the election looms is the statement’s major flaw.
This might attract voters in the short-term, in the long term is not an efficient way to deliver greater national wealth and higher standards of living.