Good afternoon. I’m here with my good friend and colleague, the Minister for Industry, Innovation and Science, Christopher Pyne, to usher in the ideas boom. The mining boom, the mining construction boom has been great for Australia. It has driven growth in incomes, but, as we have seen, the mining boom inevitably has receded. What is going to drive Australian prosperity in the years ahead? How does our economy transition? Our innovation agenda is going to help create the modern, dynamic, 21st-century economy Australia needs.
Our fundamentals are strong, we are in our 25th year of consecutive economic growth, but, we need new sources of growth if we are to maintain our high standard of living, high wages and generous social welfare safety net. Although there are challenges, there has never been a better time to start and grow a business from Australia, which can now compete for customers located anywhere in the world.
We are on the doorstep of Asia, the world’s economic engine room and our new trade agreements with China, Japan and Korea are opening up more doors in Asia for our business. There has never been a more exciting time to be an Australian business. There have never been more opportunities on the horizon for Australians. The Internet and the technologies it enables mean we are now part of a truly global marketplace. It means there are fewer barriers to entry for Australian businesses, no matter where they are located, right across Australia they can sell their products and services to just about every corner of the globe.
Our universities, our research organisations like the CSIRO, where we are today and our workforce are world-class but, Australia is falling behind when it comes to commercialising good ideas and collaborating with industry. Australia consistently ranks last or second last among OECD countries for business research collaboration. Increasing collaboration between businesses, universities and the research sector is absolutely critical for our businesses to remain competitive. To commercialise an idea, a great invention, a great innovation, a great piece of research and then grow it into new sources of revenue, new jobs, new opportunities and new industries.
Companies that embrace innovation, that are agile and prepared to approach change confidently and with a sense of optimism are more competitive, more able to grow market share and more likely to increase their employment. More jobs, more growth - that is the focus of my government. And, we are absolutely committed to ensuring that our students have the skills to find high wage and rewarding jobs, regardless of their qualifications or career path. We are going to do this by promoting coding and computing in schools, to ensure our students have the problem-solving and critical reasoning skills for the jobs of the future.
We cannot future-proof ourselves from change, nor should we seek to do so. But, we can ensure that our students are graduating with the skills and the agility to identify opportunities and embrace risk.
Now, the government's innovation package that we are releasing today will incentivise and reward innovation, entrepreneurship and risk-taking by focusing on four key areas.
First, culture and capital, embracing risk and incentivising early stage investment in start-ups. You will see in this package there will be new incentives, new drivers to ensure that Australians with new business ideas, with new enterprises will be better able to find the capital that gets them started. And, you know something? Even if their businesses don't succeed, we all benefit. We learned so much from the failure of new businesses.
We want to be a culture, a national culture of innovation, of risk-taking, because as we do that, we grow the whole ecosystem of innovation right across the economy. We become more experienced, more innovative, more agile, more prepared to take on risk and become a culture of ideas because it is the ideas boom that will secure our prosperity in the future. It is believing in our human capital and remembering that the best assets we have, the most important assets we have in this country are not to be found under the ground, but walking around on top of it is the 24 million Australians, the men and women of Australia, these and their ideas are what secures our future. And, this package will incentivise, dynamise, energise that enormous opportunity. We are going to drive business research collaboration, ensuring that there is greater collaboration between organisations like the CSIRO, universities, other research institutions and business to commercialise ideas and solve problems.
And, on that note, let me pay tribute to the CSIRO which has been a leader in this field, but will do so much more. Its new CEO, Larry Marshall, its new chairman, David Thodey, fresh from his transformational leadership at Telstra, are transforming the culture of this organisation, of the CSIRO so that it becomes, like a number of its counterparts in other countries, much more engaged with business. So that it is not only driving growth in Australia, but it is also ensuring that more Australians are imbued with its culture of imagination, of research, of invention. So that it goes right across the nation.
This is not just a list of measures and incentives and the levers that governments pull, this package is designed to inspire. It is designed to lead. It is designed to encourage every single business, large or small to be more innovative, to be more prepared to have a go at something new because in the world of the 21st-century, in 2015, that is how you prosper.
We are going to focus on talent and skills, training our students for the jobs of the future and ensuring that we attract the world's best innovative talent to Australia. I said that our best assets are walking around on top of the earth, you know something, so are everybody else's and we want to have the best talent come to Australia, whether they come to Australia for the first time, or whether they are a foreign student that has done postgraduate work here and wants to stay here and develop new businesses, contribute to the innovative economy of Australia. We want to make sure we retain and gain the best human capital that we can.
And finally, the fourth pillar of this agenda is government leading by example in the way it invests in and uses technology. Right across the board you will see there are measures to ensure that government is digitally transformed, so that it is nimble, so that you can deal with government as easily as you can with eBay or with one of the big financial institutions. We should be able to transact with government for most of our engagement on our smartphone. Digital works, it transforms, it makes it easier for business, easier for government.
It is, and the other thing that we must do is ensure that we embrace small business and you will see here measures that are going to make it much easier for smaller Australian businesses to sell to government and for government to buy from them. There have been too many barriers, it has been too hard, too much red tape, too many forms. We can sweep that aside. In 2015, we don't need that. We need to work swiftly and nimbly and government has to lead the way. This is the opportunity of the 21st-century. This is a century of ideas, this is a time when Australia's growth, when our living standards, when our incomes will be determined by the human capital, the intellectual capital that all of us have. By unleashing our innovation, unleashing our imagination, being prepared to embrace change, we usher in the ideas boom. That is the next boom for Australia and, you know something, unlike a mining boom, it is a boom that can continue for ever. It is limited only by our imagination and I know that Australians believe in themselves, I know that we are a creative and imaginative nation and inspired, led, incentivised, we will have a very long ideas boom in the 21st-century.
Thank you very much Prime Minister and firstly, on behalf of the Cabinet and the Party, can I thank the Prime Minister for creating a situation where we have a whole of government approach to innovation and science.
Soon after being made the Minister for Industry, Innovation and Science, we convened a task force which brought together nine different government departments, 11 different ministers and determined what could be done to move the Australian economy from an old economic model to a new economic model.
That was because of the inspiring leadership of Malcolm Turnbull, his reflexive and instinctive understanding that innovation and ideas are the future of the Australian economy. We have had for decades, a couple of centuries really, an economy based on mining, on agriculture, education services, more recently, tourism, more recently, financial services. But, the future of the Australian economy is to support all of those areas, but also, to expand into the ideas boom that we are talking about today.
So, today is the announcement of the centrepiece of the Government's domestic economic policy agenda. It is a very comprehensive statement. It covers over 24 different measures, as large as a new CSIRO innovation fund, a biomedical translation fund, a new compact or partnership, if you like, between government and universities and business around research, development at universities. There are many different aspects to this - landing pads overseas, international collaboration, support for incubators, visa changes, the Prime Minister has touched on many of them.
But overall they are designed to bring together all those in Australia who recognise that the future for our economy is in high-tech advanced manufacturing, the way we use data and we cover every aspect of that in this particular agenda that's been announced today.
We are particularly focussing on start-ups, on small and medium enterprises, on regional Australia, whether it's in agriculture or tourism or mining. We are using all the different parts of our economy to drive jobs and to drive growth because that's what the Australian public are looking for.
We will always deal with the other issues governments have to deal with but this is an agenda that is about jobs, it's about growth, it's about the future of the Australian economy.
I won't go through all the measures, there are many of them in the document which will be reported in the coming days but obviously we are very happy to answer any questions people might have.
Prime Minister, why is there $9 million allocated in this financial year [inaudible]?
$9 million for which particular measure?
Because the bulk of the measures begin from 1 July 2016. That's the reason.
The CSIRO $200 million in the biomedical fund, it says they are not in the Budget bottom line, can you explain how that works and the funding for NICTA, the restored funding for NICTA, is that part of the CSIRO funding or is that separate?
There is a $75 million allocation to Data 61 in which they will do a number of different measures. One of those will be to establish the relationship between government and business in terms of the $5 billion ICT expenditure each year by government and the wider $50 billion procurement by government.
So the DTO will be asked to establish a digital marketplace where small or medium enterprises put up on this digital marketplace what they are offering and the public service and government will be able to access that and say "We can use those particular services".
Data 61 will be doing something different which will be saying what government wants to do and asking for support from business.
That is in addition to the money that is being allocated to the CSIRO innovation fund which is $200 million made up of the receipts from the WIFI inventions of the CSIRO, a combination of private sector support and a direct injection of funds from the Commonwealth, which will be in the table at the back of the glossy document.
The reason why they don't show up as the budget bottom line is because they are a combination of taking equity and supporting investments that will be made by the CSIRO and the biomedical translation funds.
They are not direct grants; they will be - of course, if they make a loss, they will show up on the budget bottom line as a loss. If they make a profit, they will show up as revenue to Government but the actual investments are not grants to the CSIRO or to the new biomedical translation fund.
With the entrepreneur’s visa, will there be a cap on how many people will be approved [inaudible] year?
The answer is: no, we have not set a cap. It will be open to us to do so in the light of experience. But can I say, the more high-quality, effective, productive enterprising entrepreneurs we can attract, the better because they drive jobs. Entrepreneurs create jobs, any new business. This is why we are doing so much to encourage new businesses, whether it is through the entrepreneur’s visa or by reason of the very generous tax offsets and capital gains tax exemptions for investing in early-stage ventures. Very, very substantial incentives because one of the things we have learnt, whether from life's experience or from the experience in other countries, as I was saying earlier, that even if a new – if you start a new venture, a new business and it goes well for a while and then, for whatever reason, it doesn't succeed, you may have lost some money, your investors may have lost some money, but the overall economy massively benefits because you are wiser, your employees are wiser, your investors are wiser, everyone's learnt something and the ecosystem benefits. That's why cultural change is so important. We've got to be prepared to have a go and be more prepared to embrace risk and experimentation. It goes with this package, too. Every change that we make here, every step that we take with this, we are going to examine in the future and see how it's performed. Those things that do well, we'll do more of. Those things that do not do so well, we'll do less of and we may do something else. This is not a one-off announcement. This is not the first and last word of this Government on innovation. This is an absolutely critical theme of our administration to ensure that we are always driving innovation because, I promise you, that is the future – that is our future. It is the future for our jobs and our children and grandchildren. Innovation is a big cultural measure. It's something that we need to be better at in Australia and right across the board. There's a lot of levers being pulled here, but there may well be more to come. There will be more to come, I have no doubt.
On those early stage tax offsets you have announced, who are you targeting that at? Who do you expect this will be attractive to and what sort of take-up are you expecting? Are you careful about the budgeting on this, but what sort of take up are you expecting?
Let's look at the first one. For example, this is the tax incentive for very early stage investors. So this is a business that is in an innovative industry, innovative sector, it's incorporated during the last three years, it’s not listed on any stock exchange, it has expenditure of less than a million dollars and income of less than $200,000. So it’s an early-stage start-up. What we are proposing here is that if you invest in that, you will get a 20 per cent tax offset. That means that up to $200,000 per year. If you invested the full million dollars, then you would have $200,000 off your tax bill from obviously assessed on your other income. That's a very real incentive for you to back that new business. And, in the future, if you hold your investment for three years or more, and you sell out of it and make a gain, which we obviously hope you do, then you would be exempt from capital gains tax. Who is that going to incentivise? Pretty much any investor, but it sends a big signal as well. It sends a signal of confidence in the early stage start-up sector. This will drive substantial new investment.
Looking at the back page, the breakdown of how much money you are spending, some of them are really a lot of money. Is that because the Government doesn't think innovation costs a lot, or a sign of the economic times and how do you plan to pay for this?
I think you will find a lot of the changes that we can do immediately aren't costly but they are very significant changes to the way we'll be approaching things like tax losses and the intangible asset depreciation. Now, they might not have large amounts of money attached to them as big-ticket items, unlike, for example, the investments in the National Collaborative Infrastructure Scheme which is $1.5 billion over 10 years or the Synchrotron's investment or Square Kilometre Array investment, but they are cultural changes that will have an impact in the short term and into the future. They might not have big ticket items attached to them as new expenditures but might well have an impact on government revenues into the future. I think some of them you’ll find have got asterisk saying these are impossible to quantify until we see what impact they have on the economy. We’re not actually looking for big spending items, we’re looking for the change to the culture in our economy and that's what that reflects but over time, of course, we are able to see how some of the other measures will increase spending.
Can I just flesh this out a little bit? The initiative relating to company losses is very significant. At the moment, to be able to take advantage of your tax losses – past losses – and offset them against income in the future, you either have to have continuing ownership or you have to have the same business, you have to be conducting essentially precisely the same business. Obviously, companies, new companies, are always hungry for capital so they are always bringing in new investors. They invariably fail the same ownership test. The same business test constricts them to precisely what they were doing. In other countries – again, we have looked very widely at what's been done elsewhere – a test of predominantly similar business has been used. What that means is, again, if you have started your company, you've got one narrow application, which is fine, you thought that was going to hit the mark, hasn't worked out quite as you expected, your investors still have faith in you, other people come in so your ownership has changed, you want to branch out into another area, you are using similar technology or technology that's been derived from what you've built, but you are moving into another line of business that's related, you would currently fail the same business test. You would pass the predominantly similar business test so you can continue to use the losses that you have racked up against your income in the future. Again, this is tailored – this may seem like a small change but it actually will be very significant in terms of supporting that innovation culture of entrepreneurship.
I'd also refer you to the insolvency reforms. They might not be a big-ticket item of government spending, but not everything has to have a big-ticket item attached to it to be a very important measure. But the insolvency laws will drive economic activity and keep businesses in business that should be staying in business over the medium term. They might not show up as a massive government expenditure but will have a real impact in terms of driving jobs and growth in the economy.
You talked about risk-taking. And in some ways there are a lot of risks in this for government. They are not big-ticket items, but there is a history of risk attached to giving up tax deductions…
What is the risk?
That people start to rort them. For example, [inaudible] schemes and things like that. Now, I notice that in the 20 per cent scheme, you’ve still got to decide what the eligible business criteria will be. How heavily have you workshopped or fire tested these as possible rorts in the future?
Let me make two responses here. We obviously have a highly-developed concept of the type of businesses we are talking about, but we will develop the final definition collaboratively with the industry and in particularly with the advice of Innovation and Science Australia – and it is important to make sure you get that right because often the devil is in the detail.
Let me just say – I want to pick up on something you said about there are risks for government. There are risks for everybody. We have got to be prepared to take risks. That is why one of the aspects of the political paradigm I'm seeking to change is the old politics where politicians felt that they had to guarantee that every policy would work, they had water everything down so there was no element of risk. Let me tell you: I'm not guaranteeing that all of these policies will be as successful as we hope they will be. Actually, I'm very confident about it because we've worked very hard on it. We had a great team, a lot of good collaboration, but if some of these policies are not as successful as we like, we will change them. We will learn from them. Because that is what a 21st century government has got to be. It has got to be as agile as the start-up businesses it seeks to inspire.
Prime Minister, why have you left the $3 billion R&D tax concession untouched given there are concerns about its effectiveness and integrity?
There have been concerns expressed about it and it's a complex area. We've looked at it carefully – the Minister and I and our respective advisers – and Innovation and Science Australia will be reviewing it carefully with the industry. It has been refined over time and it will be refined in the future.
When will we see some of the details, as Laura was saying, the tax breaks for eligible businesses are going to be coordinated with industry and the entrepreneur visas, eligibility will be determined with the sector. When will we see some of the details about those discussions?
There's a lot of detail in the fact sheets associated with this announcement today. You might note that some of the measures you've talked about start on 1 July, 2016 and we've consulted a great deal with the stakeholders in the sector, something that Karen Andrews as the Assistant Minister for Science, Wyatt Roy as the Assistant Minister for Innovation and I, the Prime Minister, have been consulting for 10 weeks or more about these measures. And this is a day to be very optimistic and positive about what we have come up with in those consultations and it's important for those consultations to continue right up to the time that these measures are implemented. Obviously there will be detail around some of the tax measures in particular, the visa measures in particular, but there's a lot of detail in these packages and I think the Australian public takeout from this is that the Government has a plan and an agenda around jobs and growth in the innovation and science sector about putting it in the centre and they would expect us to go away now with the Tax Office and with the Department of Industry, Innovation and Science and implement these measures. Remember, too, there's a whole of Government approach to this. So we're changing governance. There'll be a new subcommittee of the Cabinet called Innovation Science chaired by the Prime Minister. There'll be an interdepartmental committee, because this area covers nine different portfolios. There’ll be a delivery unit within the Department of Industry, Innovation and Science to drive the agenda and Innovation and Science Australia will have a Chair as Bill Ferris, Alan Finkel – the Chief Scientist – will be the Deputy Chair of Innovation and Science Australia. They will have a role in evaluating, advising and reviewing the NISA. And that's a pretty comprehensive way of making sure that we get everything right. As the Prime Minister says, we might make mistakes and the public will accept that rather than being too timid about making necessary changes to drive our economy.
On the changes to insolvency laws, it might encourage – to coin a phrase – some agility with the accountants of Australia. What is the ATO advice on this? And are they telling government that they perhaps need some more investment to ensure that some of the agility is not exposing the Government to losses?
The changes we're proposing to insolvency laws to encourage entrepreneurship, innovation and business continuity and ensure that more people keep their jobs and that more businesses keep going rather than being shut down by secured creditors in a peremptory way, those changes have been recommended by that innovative gang at the Productivity Commission. This is not something that's quite as revolutionary as you imagine. In fact, it was something I recommended and stated as the Coalition's policy in 2009.
This has been a problem in Australia for a long time, particularly small and medium businesses will tell you this, that the way the insolvency laws have operated is that directors have had every incentive to, the minute there is a problem to basically put in the administrators and that's essentially curtains, because in large part because there are what are called ipso facto clauses in contracts with suppliers and customers which say the contract is terminated if you go into receivership or administration.
The changes we're proposing to adopt and they're changes that have been recommended for a long time and I've been talking about them for many years, the PC recommends them. What they will do is they will actually protect creditors, they will protect shareholders.
It takes us some way, but not all the way to the American Chapter 11 system. It's got a very heavy involvement of the courts which we generally don't want to be as legalistic or lawyeristic as the Americans, but this is a good change and it's something that's been very carefully considered. As I said, over many years and most lately by the Productivity Commission.
Assuming that a lot of this innovation is going to be underpinned by broadband services how much of a drag on innovation is the 16 to 27 billion dollar blow-out in the cost of the NBN, the delays in the rollout, the slower upload speed that's going to down grade revenues.
Those three premises you've described are all regrettably untrue.
No, they're not.
I don't know whether you want to go into the NBN here, but let me just say that the NBN project was the single most reckless project of the former Labor Government’s. It was undertaken without any idea, realistic idea of how long it would take to build or how much it would cost.
This someone of the very rare occasions, very rare, where a bad project doesn't get worse and actually gets better. But, it is rolling out much more rapidly than it would have been done under the previous approach of Labor. It will be finished six to eight years sooner. It will cost about $30 billion less than it would under Labor. Those are not my numbers, that’s the numbers from the management of NBN Co. So I can assure you it's happening and the speeds both download and upload are very high.
We're seeing very strong take up and last time I checked the rollout figures, and they're published every week there is about 1.5 million premises that are able to connect to the NBN and they are activating over 10,000 premises a week with that rollout rate, that activation rate increasing.
It is the most complex infrastructure project ever undertaken in Australia. You know, as you've heard me say before, we wouldn't be starting from there but we inherited it and we have turned it around but - it will be finished by roughly 2020, it will be finally complete by 2020 but obviously millions of people will have access to it long before then, so most Australians will have access to it long before then.
Prime Minister, you mentioned the Productivity Commission, you're sitting on a report from the commission on start-up business and exits. I think, amongst other things that report recommends that there's no serious funding constraints on small business. Do you agree with that conclusion and are you going to put out a formal response to that PC report?
We respond formally to all PC reports but I can't - look, David, I don't want to have - give a one line response to obviously a very detailed report.
I'd say this generally about capital in particular in the start-up area, in - mostly in the tech sector, there is plenty of money available, as you've seen from the venture funds that have been raised. The shortage or the weakness is at the very early stage and that is why we've provided some real incentives there.
When a business gets to the point that it's raising 20, or 50 million, 100 million dollars, if it's got to that point there is plenty of money here and elsewhere in the world for that matter.
So really - there are many levers, there are many measures we have to adopt but if we want be, if we want to enjoy the ideas boom; if we want to be an innovation nation, then we have to ensure that we look very carefully at the where there are weaknesses, in the economy as it stands, in the market as it stands and where we can provide a nudge, an incentive, a bit of encouragement to make the system work better.
It's like a very big deal which is the poor collaboration between research institutions, mostly universities and business. Why are we so much worse at it here than, say in the UK or the United States where the academic culture is very similar, business culture is very similar and the fact is that that the measures by which you get research grants are all based largely on the publish or perish approach so that you are valued as a researcher by how often your latest piece of research is cited in other academic work.
So what we are doing and with this is ensuring that one of the key criteria for securing support, getting that next research grant is engaging with and cooperating with business and industry, and that's good for everybody and it will be good for the academics, it will be good for industry.
We have a very low number, ratio, if you like, of PhDs working in industry compared to very similar economies like, again, the US or the UK. This is one thing that will change that. Bring business and research closer together, and the advantages of that are obvious. They can't just be operating in silos not talking to each other.
These are all the nudges and changes and levers - incentives we're undertaking. But this is all unleashing the ideas boom. This is all about Australia becoming an innovation nation.
There is a big cultural change afoot here. It's a mood of optimism, of entrepreneurship, of imagination and that is what will drive our prosperity in this the 21st century.
And on that note, on that optimistic note, I will leave you to enjoy studying the package.Thanks very much.