Feeding our digital innovation engine through Research & Development

Australia has seen significant growth in Research and Development (R&D) expenditure over the years, however there is still a large gap between us and other leading countries. Comparatively, Israel spends twice as much on R&D as a percentage of GDP and Australia ranks below the OECD R&D expenditure rate as percentage of GDP.

RD-AUS other GERD-charter

In addition, Australia has a $22 billion tech trade deficit and is lagging behind other developed countries in its ability to commercialise innovation. More than 50% of Australia’s business R&D spend is still focused on manufacturing, mining and construction and less. For instance, in a 2013 report detailing the world’s top 1000 global R&D spenders, just six Australian companies featured on this list and at a cumulative level their R&D expenditure was only USD$1.8 billion compared to the global top six companies R&D cumulative spend which accounted for USD$62 billion.

Australian R&D Expenditure vs. the world

Moving beyond development… to commercialisation

Australia’s ability to innovate can’t be denied. Over its history, Australia has developed a number of successful inventions like the Bionic Ear, the Ultrasound and the Black Box flight recorder. However, our inability to commercialise digital innovation means many more opportunities have been missed.

One of the reasons is that our country has the lowest number of researchers (percent) working in business enterprises but one of the highest working in higher education1. For instance, the number of researchers in the manufacturing and service sectors in Australia (3.1 per 1000 employed in industry, 2009) was less than a third of the average figure for the four Scandinavian countries (10.0). These numbers reflect a huge ‘lack of investment in, and a significant disadvantage for digital innovation in Australia’s industry sectors.’

RD-AUS researchers-charter

Setting up an offset to drive our digital innovation engine

One of the immediate priorities for Australia is to increase the turnover cap for the federal government’s 45% refundable tax offset to companies with annual group turnovers of up to $50 million.

At the moment the offset is limited to companies with annual group turnovers of less than $20 million, thereby denying many innovative SMEs access to the program. Increasing the turnover cap to would improve the commercialisation success rate for a lot of digital innovation that might not otherwise occur.

It would also allow more companies to access short term financing by using these tax offsets as security which would bring much needed cash flow relief at important phases in their development. By taking this step, Australia would be able to come closer to other developed nations in terms of R&D business incentives and potentially attract more international organisations willing to invest.

Graph: 2013 Strategy& – Booz & Company’s Ninth Annual Global Innovation 1000 Study Navigating the Digital Future, November 2013; BRW, ‘Telstra leads but just six Aussie companies among world’s Top 1000 for R&D investment’, 29 November 2013
Graph: “…innovative ideas” – Australian Government – Department of Industry, Innovation, Science, Research and Tertiary Education, ‘The National Survey of Research Commercialisation 2010 and 2011’, December 2012
1 Australia’s Chief Scientist – Australian Government, ‘Australia’s Position in the World of Science, Technology & Innovation’, May 2012