Australia is missing out on a $7 billion per year economic boon because it has failed to keep pace in the international research and development stakes, according to a new report.
Tax cuts and red tape have dominated discussions ahead of Treasurer Jim Chalmers's economic roundtable.
But getting investment flowing back into technological innovation is critical to fixing productivity growth, said the Business Council of Australia, along with home-grown tech companies Cochlear and Atlassian, as they released a report by consulting firm Mandala on Monday.
Just by fixing research and development (R&D) policies and without increasing the burden on the budget, an extra 0.1 per cent could be added to productivity growth each year, they claimed.
"Empowering businesses to make R&D investments is critical to making our economy more productive and innovative, and for delivering greater prosperity for all Australians," said the organisation's chief executive Bran Black.
But Australia has slid down the international rankings in the past decade, with large businesses' R&D investment falling 24 per cent in that time.
The nation's total R&D expenditure has fallen to 1.7 per cent of GDP, compared to the average of 2.6 per cent across peer economies.
The report highlights six tweaks that could once again make Australia a world leader in innovation and deliver $5 of value for every $1 spent by the government.
They include simplifying the tax incentive premium for R&D to a flat rate of 18.5 per cent, removing the existing tax incentive cap of $150 million, taxing profits from Australian innovations at a concessional 10 per cent rate, and incentivising collaboration between industry and research institutions.
The report also called for streamlined reporting and compliance requirements to access the R&D tax incentive, and simplifying R&D grants for businesses by consolidating the various existing grants into fewer nationally significant programs.
Cochlear chief executive Dig Howitt said clear, well-funded strategies would capture the full value of local innovation and attract high-value global companies.
"Given that R&D and intellectual property are mobile, there are constant efforts by other nations to attract elements of Australian business's value chain - particularly our innovation, IP development and manufacturing - offshore," he said.
Atlassian chief of staff Amy Glancey said Australia has always been ideas rich but has fallen short in commercialising innovations and selling them to the world.
