A week away from the anniversary of NSW Labor’s first year in power, it’s time to offer some help on innovation, science and technology, industry and trade.
Unfortunately, the current situation is fairly bleak. We’ve experienced cancelled grants and the scrapping of the Modern Manufacturing Strategy, the NSW Industry Development Framework, the NSW Trade Statement and the NSW Innovation Strategy, with nothing to replace them.
There is now a one-and-a-half page Innovation Blueprint ‘discussion paper’ which was eleven months in the making. We have the promise of an Innovation Blueprint with no detail on length, depth or breadth, to be delivered after the upcoming budget cycle, relegating investment in innovation, trade and industry to languish for another year.
It is not good enough.
On innovation, I have decided to put policy and prosperity above politics and go beyond criticism.
The people of NSW deserve a government that takes a leadership approach to innovation and creates an environment where enterprise is encouraged, not ignored.
As a Liberal, I want to see productivity-enhancing investment, the creation of new market opportunities, tax reform and market failures addressed.
I think about government’s role as the functions it can uniquely utilise for the benefit of innovation policy and investment to reach it. They are something like:
- Mission orientation
- Environmental stability
- Regulatory leverage
Mission orientation
Missions are big, hairy goals that require significant buy-in and outlays. They have the potential to drive market investment and innovation, while being supported by democratically elected representatives accountable to the public. The concept draws on the work of Professor Mariana Mazzucato.
The NSW goal to achieve net zero emissions by 2050 – first announced in 2016 by the Coalition – was one of the first jurisdictions in the world to do so. Or reducing the road fatality toll to zero by 2050 (another Coalition mission).
Each mission requires investment, collaboration and innovation, with many side benefits arising from achievement of the goal. In reaching net zero emissions, we may also create a domestic market producing some of the cheapest energy in the world, leading to enormous benefits for citizens and unrivalled opportunities for business.
In NSW, we might consider moonshot missions like, ‘reduce the rate of domestic homicide to zero by 2030,’ or ‘develop personalised medicine accessible to all for improved health in an aging population by 2050’, or even, ‘Australians on Mars by 2035’. Using our Intergenerational Report to see state-wide challenges is just one place to start looking for direction.
For example, building personalised medicine requires quantum technology that is currently in development here in NSW. A sector, incidentally, that is greatly enhanced by organisations like the Sydney Quantum Academy and the Semiconductor Sector Service Bureau (S3B), which have received no government funding certainty, despite significant, long-term NSW funding expiring imminently.
Environmental stability
People often cringe at the term ‘innovation ecosystem’. Professor Mazzucato asks what do you mean by ecosystem? Is it parasitic or symbiotic.
Government has a unique role in providing ecosystem or environmental stability, so that innovators have at least one partner they can rely on in a highly competitive startup/scaleup world and where investors know that their money is in a relatively safe space, creating further market opportunities.
Reliable finance, strong trade networks and a well-educated population make a prosperous country.
Reliability looks like grant processing that is clear and timely, transparent and accountable. It is the opposite of what has been happening with NSW’s MVP Venture grants. There should be strict and swift decision-making requirements for departments to adhere to and report against.
Stability also requires a demonstration from government that investment in research and development is a priority. Australia is sitting at 1.83 per cent of GDP spent on R&D, while Switzerland hits 3.36 per cent and consistently ranks as the most innovative country in the Global Innovation Index 2023.
There are clear returns to be made. CSIRO found that, in their most conservative estimate, there is $3.50 worth of economy-wide value created and a 10 per cent average annual return to innovation for every dollar spent on R&D in Australia.
Environmental stability also creates a pathway for private investment.
In March 2023, the Business Council of Australia released a report titled ‘Australia’s investment drought and what to do about it’, explaining that “Australian capital markets are not creating enough financial assets to accommodate the growing domestic savings pool.” The BCA specifically calls out policy uncertainty as a major risk to business investment.
To expand investment opportunities, the NSW government should fostering strong trade relationships for the benefit of local business to receive investment and find export partners, diversify markets and enhance economic resilience. This work should be backed up by clearer ministerial-led coordination at a national level and proactive partnership-building with international governments and companies.
It is also clear that high-quality education is a feature of innovative and productive economies. Having confidence in generations of intelligent, inquisitive and entrepreneurial Australians with a range of skills, knowledge and interests underpins a successful society. These features build an environment where risk-taking, world-changing work can happen.
Regulatory leverage
I know we’re in opposition, and it’s the Coalition’s job to hold the government to account, but I can’t help myself.
After reading the one-and-a-half-page Innovation Blueprint Discussion Paper, after hearing empty ministerial rhetoric like “I’m advocating for every industry,” after speaking to industry leaders who despair at the government’s lack of interest, I can’t help but list some actions that could be taken to leverage its unique legal and market position, in addition to the measures I’ve already outlined.
- Launch an investment vehicle, like the $2 billion Breakthrough Victoria fund, which directly invests into startups, or the $130 million Queensland Venture Capital Development Fund, which funds VCs to support startups.
You could think of it as a more flexible state Future Fund. (Incidentally the federal Future Fund was created by John Howard in 2006 with reference to the nation’s first Intergenerational Report.)
Investments include specific conditions about outcomes, returns, co-investment and equity arrangements, which aim to achieve mission-oriented success and a financial benefit for taxpayers.
- Create attractive contract terms for mission-oriented startups, scaleups and innovative companies to locate and grow in NSW, from utilisation of crown land for warehousing near key infrastructure (for example, ports) to departmental procurement to payroll tax incentives.
- Develop equity arrangements for large investments in individual companies that capitalises on success by returning gains to taxpayers while providing a de-risked loan. Let’s not go down the Tesla or Google route, where the US government pumped in hundreds of millions in US dollars but didn’t have loan terms to receive a return.
- Utilise government bonds to create ‘patient finance’ for long term investments where R&D to commercialisation takes years, not months.
- Undertake land value tax reform to incentivise productive use of land and disincentivise unproductive property-holding as a means of wealth creation. This also has the effect of decreasing house prices by removing stamp duty and encouraging greater housing mobility, and frees up finance to flow into innovation and productive investments.
Utilising mission orientation, environmental stability and regulatory leverage, these suggestions reflect practical steps that would demonstrate leadership and drive growth in a time when NSW Government vision and action is sorely missed.
The Hon Jacqui Munro MLC is a Liberal member of the NSW Parliament’s Upper House
Do you know more? Contact James Riley via Email.