Who and what is really driving Australia’s 21st century industry and innovation policy? Is there a clear overarching vision that is executable and sustainable to reverse – or at least soften – the economic bite-back from 60 years of deindustrialisation and innovation commercialisation neglect?
Do we even have an industry policy, or merely a poor facsimile of one made up of a collection of disjointed programs relentlessly marketed with cheerleader rhetoric under the banner of renewable energy-led industry rejuvenation?
These questions have been dogging industry participants for years and more so now amid a plethora of big and small ticket government program announcements last year.
The answers are hard to pinpoint. They are multifaceted and complex, and often reflect the biases and agendas of a diverse set of innovation and industry participants across the public and private sectors.
We know that technological invention, commercialisation, and diffusion at scale means both economic and strategic power and agency to countries, companies, and citizens.
Is our relative underperformance and lack of expertise due to ignorance or magical thinking? The absence of a Realpolitech approach?
Is it cultural, behavioural, structural, aspirational? Is it a communications problem in that we haven’t properly articulated the risks of inaction to enough people over many decades?
Different industry leaders and players put different weightings on each of the above. But we do know that successful innovation systems – Silicon Valley, Israel, Germany – are by nature hyper-connected multiplayer systems that span companies of every shape and size and interact with diverse government departments from defence and foreign policy; energy and resources; industry, trade, and education.
To be successful in a technology and innovation-led world requires a level of savvy, a gut instinct about where the future technological and market opportunities are and the risk-taking to invest, to lead, to try new things amid volatility and uncertainty, and to learn when these things almost never work the way they were first imagined or planned.
The famous English economist John Maynard Keynes – the dominant economics influencer in the inter World War years – coined the term ‘animal spirits’ to describe the emotion that drives business and investment in free markets.
The image he invoked of the interplay between the free market ‘animals’ and the State was of a caged lion. Put very semantically here, the role of government was to let the lion roar without letting it go so far as eating everything in sight.
“But what if that caged animal is not a lion, or a tiger or a wolf, but a domesticated animal like a pussy cat or …a gerbil? Can governments help a pussy cat grow into a lion?” asks Mariana Mazzucato, a celebrated economist and Professor in the Economics of Innovation and Public Value and author of the widely read, The Entrepreneurial State and The Big Con. Mazzucato will be in Australia on a speaking tour March 11-14.
If it’s too hard right now to see a big picture strategy for Australian industry in 2024 and beyond, what can be gleaned about Australia’s animal spirit when we look at some of the key component programs and government functions and strip them back to their core influencers?
- There’s the flagship Green Energy Superpower moonshot ambition which is to be funded by the $15 Billion National Reconstruction Fund (NRF). That ambition is driven by net zero goals and the need to respond to the US Biden Administration’s trillion-dollar Inflation Reduction Act (IRA) subsidy push.
But a bunch of countries want to dominate the renewable energy market – big ones like China and the US and many more in-between. Other than abundant sun, wind, and land, what are Australia’s unique technological & scale advantages in the renewable energy superpower race? And as Roy Green, the new incoming CSIRO board member with deep expertise in innovation systems globally, has pointed out, the NRF is a financing vehicle not an industry policy.
Now, as InnovationAus reported, a new federal taskforce has been set up with Treasury, Industry and led by the Department of Climate Change, Environment and Water (DCCEEW). The aim is to design a full response to the US’s IRA and potentially puts tax breaks and subsidies on the table for clean energy and manufacturing companies.
But it’s a US Presidential election year with a very real possibility Donald Trump could once again the leader of the free, fractured world we are struggling in. Although Trump may not scrap the IRA, it will look very different.
Trump will want to release a spate of regulatory burdens now slowing (and forcing closure of) many IRA- driven projects. What will be Australia’s response to those likely changes after more than a year devising a response to Biden’s IRA?
- There is AUKUS and the long-awaited but not-here-yet Defence Industry Strategy. The latter was expected before Xmas. But we know that both AUKUS Pillars 1 and 2 are driven by our bigger partners, primarily the US.
- Australia’s R&D spend at 1.6 per cent of GDP, is now one of the lowest in the world as most countries are increasing theirs to 2.5 per cent and as high as 3 per cent. More problematic is that our R&D policy is driven – or captured by – Australian Universities. It is non-commercial and underperforming, if not broken.
“The incentives and speed at which industry and research entities operate is misaligned and there is a fundamental mismatch between the research/academic mindset and delivering commercial outcomes for business partners,” says Industry Innovation and Science Australia (IISA) in its recent report to Industry minister Ed Husic, ‘Barriers to Collaboration and Commercialisation.’
- Government Technology Procurement policy and technology implementation has long been out of reach for the startup and critical middle market technology companies. It is clearly driven by the big tech multinationals, the global consultancies like McKinsey, PwC and Accenture, as well as the cloud hyperscalers like AWS and Microsoft and their domestic subsidiaries. The number of technology system implementation failures in federal and state governments in the last decade is not just embarrassing, they result in real harm to citizens and businesses.
- Our tax incentives and grant systems are driven by Treasury and the much-criticised Productivity Commission, the latter accused of being stuck in a legacy economic and industry mindset dictated by mining, property and service economy interests.
- Emerging technology standards, critical for the development and deployment of technology globally and domestically – especially in this era of all powerful, disrupting new tech like AI and intelligent machines; synthetic biology and Quantum computing – are primarily set by their inventor countries. Australia is not one of those at any meaningful or influential scale.
There is also just random, weird stuff; discrete policies and programs that make you go “Huh?”
For instance, are the proposed changes to the Sophisticated Investor Program – raising the qualifying number from $2.5 million in net assets (including the value of the family home) to $4.5 million, possibly excluding the family home – about protecting the elderly and poor from bad actors with bad investment proposals? Or is it a result of quiet lobbying from large investment and private equity firms who want to reduce competition?
Or like Labor’s shuttering the never-off-the-ground Australian space and satellite program introduced by the Morrison government and designed to gather data on natural disasters, agriculture, marine and climate effects. Labor ended the program citing budget repair at a time when it produced a $19 billion surplus.
Or like announcing the $392 Industry Growth Program, which offers $50,000 to $5 million in matched grants and funding to growth companies, but requires ‘winners’ to sign-on and pay handsomely for the expert advice of a very small group of experts of widely varying degrees of relevant expertise.
What I intuit from all of the above, perhaps too reductively or harshly, is that Australia’s animal spirit is more like a sheep, unthinkingly grazing off the bounty of the land and only spurred to move with the bark and dominance of a smart Kelpie or Border Collie herding the throng in one direction or another. (The dog in this metaphor are economic superpowers like the US and China.)
Put simply, our defence and industry policy and ambition is more servile, than assertive. Our innovation and growth companies more ‘me too’ than ‘new to’. Our business mindset and risk-tolerance more scraping than scrappy.
The sound of our animal spirit is not a roar but a baa. Or worse, it’s a ‘Bah, Humbug!’
Can you get a sheep to grow into a lion? Anything’s possible. But not without some serious science and technology clout.
