ARDR Analysis

From lagger to leader

Innovation and Science Australia has released its Australia 2030: Prosperity through innovation strategic plan

Australia 2030: Prosperity through Innovation details five strategic imperatives - Education; Industry; Government; R&D; and Culture & Ambition - that are addressed with 30 recommendations.

January 2017 - Innovation and Science Australia's innovation strategy aims for Australia to become a top tier innovation nation by 2030.

Based on the innovation system's recent performance it is an ambitious goal. In the latest 2017 Global Innovation Index, which assessed 127 nations, Australia was ranked 23rd, down from 19th in 2016.

And even more worrying is the recent negative trend of Australia's gross expenditure on R&D (GERD) as a percentage of GDP - dragged down by a declining contribution from business.

ISA's 2030 Plan lists 30 recommendations addressing the following five strategic imperatives:

  1. Education: Respond to the changing nature of work by equipping all Australians with skills relevant to 2030;
  2. Industry: Ensure Australia ‘s ongoing prosperity by stimulating high-growth firms and raising productivity;
  3. Government: Become a catalyst for innovation and be recognised as a global leader in innovative service delivery;
  4. Research & Development: Improve R&D effectiveness by increasing translation and commercialisation of research;
  5. Culture & Ambition: Enhance the national culture of innovation by launching ambitious National Missions.

It has been anticipated that ISA would have a look at the R&D Tax Incentive (Incentive) as a potential way of improving business spending on R&D (BERD. ISA chair Bill Ferris, who also chaired a 2016 review of the Incentive, recently said that the policy may be out of step with global innovation leaders, which rely more on targeted measures such as grants (see R&D Tax Incentive outdated?).

Illustration of development of Business and Government expenditure on R&D as a percentage of GDP
Figure modified from Australia 2030 - Prosperity through Innovation report

The Incentive is with $3 billion the Australian Government's greatest single expenditure on innovation.

But the Incentive could be better targeted, ISA says, and proposes to more support direct grant programs that target national priorities.

Major government support programs for R&D in Australia (2016-17):

(Total expenditure of government on R&D): $10.1 billion):

  • R&D Tax Incentive - $3.1 billion, the government's largest single innovation support program;
  • University Research Block Grants - $1.78 billion;
  • National Health and Medical Research Council (NHMRC) - $841 million;
  • Australian Research Council (ARC) - $774 million;
  • Commonwealth Scientific and Industrial Research Organisation (CSIRO) - $787 million;
  • Australian Nuclear Science and Technology Organisation (ANSTO) - $212 million;
  • Defence Science and Technology Group (DSTG) - $438 million;
  • Cooperative Research Centres (CRC) - 150 million;
  • Australian Renewable Energy Agency (ARENA) - $190 million;
  • Biotechnology Translation Fund (BTF) - $125 million;
  • Australian Centre for International Agricultural Research (ACIAR) - $105 million;
  • Geoscience Australia (GA) - $140 million;
  • source: Australia 2030: Prosperity through Innovation report

Changes to the Incentive could also stimulate industry-research sector collaboration - the 2017 GII ranked Australia 32nd in this indicator - by introducing a 20% collaboration premium on tax offsets.

But ISA also suggests to increase institutional support for commercialisation by establishing a dedicated stream of funding for translational activities. This includes to evaluate scaling-up industry higher degree by research (HDR) placement programs.

International examples, such as the Knowledge Transfer Partnerships in the UK, have been successful in "providing industry with a facilitated one-stop shop to access HDR talent".

Australia's research base has strength in a range of areas that will be important to address social and environmental challenges.

But where will future jobs and growth come from? ISA recommends to prioritise investment in artificial intelligence and machine learning to capture opportunities arising from the 'fourth wave' of the internet.

In general, ISA highlights the importance of digital industries for Australia moving forward. Thus it says that the adoption of digital technologies will be critical for improving capital and multifactor productivity.

"Greater adoption of digital technology could increase Australia’s annual GDP growth rate by 0.7–1.2 per cent."

ISA also proposes to increase current Export Market Development Grants funding, a key financial assistance program supporting exporting firms. The recommendation is meant to especially help smaller high-growth firms, which either have exceptional growth in employment or turnover. The importance of these firms was recently reviewed in the Australian Innovation Systems Report 2017 (see Shooting stars).

In line with the National Innovation and Science Agenda (NISA), ISA highlights that Government procurement could be used as a lever to stimulate innovation, especially within small to medium sized enterprises (SMEs). It recommends to grow government procurement from SMEs to 33% by 2022, and to increase the use of innovative procurement strategies.

The structure of employment continuous to change, shifting towards the services industries, where already 80% of people are employed in Australia. Alongside this development, the skills these industries require are also shifting - and are becoming more complex.

Digital skills and skills relating to science, technology, engineering and mathematics (STEM) are increasingly important, but at the same time, employees also require more 21st century skills, including interpersonal, creative, problem-solving and entrepreneurial skills.

ISA sees providing a world-class education as fundamental to its plan, and its recommendations not only target better teaching outcomes in schools, but also call for a review of the Vocational Education and Training system.

According to ISA, Australia's school system performance in STEM needs to improve, as it has declined in the last decade, also in real terms. This is indicated, for example, in the Program for International Student Assessment (PISA) studies. But ISA also sees a need for our education system to support humanities, arts and social sciences (HASS) skills that nurture interpersonal skills such as empathy and creativity.

Potentially conflicting aspirations may here be at work. As established in the 2014 GII report, education systems that focus too narrowly on test results may actually fail in stimulating creativity, critical thinking, and communication skills that innovative societies require (see box).

The 2014 Global Innovation Index focussed on the human factor to innovation. It concluded that nurturing of human capital at all levels, and retaining as well as attracting talent are crucial elements of a well functioning innovation system.

At the same time, the migration of skilled workers, often feared as a 'brain drain', should be seen as brain skills circulation as human resources become remote-although-accessible assets of expanded networks.

According to the report, knowledge, innovative skills, and personal qualities (such as entrepreneurship, leadership, creativity, and risk propensity) should be developed from early childhood. Education systems that too narrowly focus on test results could fail in stimulating creativity, critical thinking, and communication skills that innovative societies require.

The conclusions of the 2014 GII report also suggest that cultural factors are setting countries on a path to become innovation leaders. [see also our 2014 analysis 'Of leaders and laggers']

This is also recognised in ISA's plan.

It outlines a vision for Australia to evolve into a nation with people and institutions that think differently, collaborate in new ways, and take more calculated risks.

To facilitate this change it recommends National Missions - large-scale complex undertakings designed to address audacious challenges. Canvassing the kind of challenges it has in mind the report cites the famous J.F.K quote:

We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard’.

It is a fitting quote making it clear that ISA wants Government to think big and courageous in this.

As a first National Mission it proposes to turn Australia into the healthiest nation on earth through a project that applies genomics and precision medicine.

According to ISA, Australia has already significant strengths in this area, and with the Medical Research Future Fund and the Biotechnology Translation Fund has a strong base to pursuit major medical research and innovation projects.

However, whether the current Australian Government will take up the baton and run with it remains to be seen.

More information:


The image shows the top 10 countries ranked in the 2014-2015 WEF Global Competitiveness Index and the 2015 Global Innovation Index; shaded are the countries that also spend the most on foreign aid relative to their gross national income, according to a report recently released by the OECD on the 29 members of the Development Assistance Committee (DAC).
Data and graph drawn from: WEF Global Competitiveness Index 2014-15 report; Global Innovation Index, and the OECD DAC 2016 report.