It’s a pleasure to be with you and I thank Innes [Innes Willox, Chief Executive, Ai Group] for inviting me to address your quarterly dinner.
I appreciate your generosity in giving me several opportunities to join you.
I was pleased to speak at an Ai Group lunch in Melbourne in August, and to launch your report on industry research collaboration in Canberra in September.
I’d like to again thank the Ai Group for being such a strong advocate for its membership as well as a strong supporter of the government’s industry policy.
Australia’s Economic Achievements
We are now in our 26th successive year of growth.
This has only been achieved by one other OECD country, with the Netherlands achieving 26 years of growth between 1983 and 2008.
The Australian economy grew 3.3 per cent in the last year and our unemployment rate is just 5.6 per cent.
Australia is ranked 13th out of 189 countries for ease of doing business as measured by the World Bank and OECD.
But we cannot rest on our laurels given the economic challenges we face.
Global growth has been below pre-GFC levels for some time, and uncertainty in the global outlook will continue to affect Australia’s economic trajectory.
Income growth in advanced economies is also relatively flat and if this continues our living standards will be eroded.
These challenges make it more important than ever that Australia has a strong and stable base for growth, and that our industries remain world class competitive.
Importance of Innovation
Innovation is the key to remaining competitive.
Innovation is about challenging norms and doing things differently to get better outcomes.
Research by my department shows that businesses that innovate generally perform better than those that don’t.
They make more income from sales, generate more profit and employ more people.
This applies right across the Australian economy. It is critical to all businesses, not just to start-ups or tech companies.
At the national level, innovation accounts for 60 per cent of Australia’s productivity growth.
The OECD also estimates that as much as 50 per cent of economic growth in its member countries can be accounted for by innovation activity.
My portfolio is focused on ensuring industry, innovation and science work together to drive future economic growth and prosperity.
I would like to speak about the three pillars of our strategy to achieve this goal.
First, we are addressing fiscal and tax competitiveness challenges at the macro level.
Second, we are engaging in microeconomic reform to create long term competitive jobs.
Third, we are making sure the policy environment is right for businesses to innovate through the National Innovation and Science Agenda.
1. Macroeconomic Reform
1.1 Budget and Tax
The Government can best help Australian businesses realise their potential by creating a business environment that is conducive to growth.
What we can do is ensure the underlying settings in areas like business tax and finance, labour, infrastructure and skills, make it easier for businesses to thrive.
At the macroeconomic level, we face both fiscal and tax competitiveness challenges.
On the fiscal front, we have a clear plan to move back to surplus.
We’re determined to get our public sector finances under control so that we're not leaving a debt that will lead to higher taxes.
We are building a buffer for when future economic shocks inevitably hit.
In terms of tax competitiveness, the Government is committed to reducing the tax burden on industry because this will encourage investment and job creation.
The United Kingdom is moving towards a 15 per cent corporate tax rate.
Once the new administration is sworn in, the United States will almost certainly look to reduce its company tax rate too.
We must be able to compete; otherwise rational capital will look elsewhere.
Our Enterprise Tax Plan will progressively reduce the company tax rate over 10 years to 25 per cent.
We’re also providing additional tax incentives for small businesses.
And we are working to reform inefficient taxes and red tape that hinder businesses, costing our country $176 billion a year.
Already, we have reduced the regulatory burden by $4.8 billion since 2013 and a further $15.7 billion from repeal of the carbon tax.
1.2 Industrial Relations
We are committed to restoring the Australian Building and Construction Commission.
This reform will ensure we have the rule of law on building sites across the country, and enable construction workers to do their jobs more productively.
It will generate jobs and is expected to reduce the cost of our major construction projects by about 30 per cent.
Just this week we passed legislation to create a registered organisations commission to oversee the governance of union and employer bodies.
We have opened up new markets for Australia’s products and services through concluding free trade agreements (FTAs) with China, Japan and Korea.
These provide unprecedented access for Australian businesses to the world’s largest and most dynamic markets.
This will help businesses in the region to build partnerships so they can better target local and international opportunities.
We are engaged in delivering the Regional Comprehensive Economic Partnership (RCEP) with ASEAN, China, Korea, India, Japan and New Zealand.
This is a significant regional trade agreement, representing a combined GDP of more than USD 22 trillion and a total market of almost 3.5 billion people.
In addition, we are progressing towards trade agreements with Indonesia and the European Union.
But we are clear-eyed about the world in which we live.
While we are focused on opening new markets, we are equally committed to ensuring Australian businesses can compete on a level playing field.
We must have a rules based environment.
That’s why the Anti-Dumping Commission is so important.
It provides a mechanism which can help ensure the playing field is level and allows Australian businesses to compete on merit.
1.4 Energy, Gas and Manufacturing
Power prices, gas shortages and a hostile attitude to industry from some in the political sphere have combined to make the job of manufacturing even harder.
This does not have to be the case though and we have to change on all three fronts.
The starting point is that our industry has a great capacity to innovate and compete with the best on the global stage.
Recently I was in Detroit where Australian firms like advanced toolmaker ANCA are viewed as the best in the world in the world’s toughest market.
Similarly, I saw first-hand at Ford’s global headquarters that it was the lightweight carbon wheels from Geelong manufacturer Carbon Revolution which had been selected for Ford’s global premium sports car the GT and the Mustang.
Like all developed economies, Australia will continue to consume steel and aluminium, and increasingly carbon fibre.
The question then is not whether we will need these products, but whether we produce them here in Australia or simply export the jobs, the emissions and the profits overseas as some seem to want.
My view is that we can and should seek to make what we can in Australia in areas where we can be the world class competitive.
Against this background, it is astonishing that Federal Labor deliberately declared its intention to close down thousands of blue-collar jobs.
Federal Labor Senator Sam Dastyari moved in the Senate to close down power stations such as Hazelwood as well as major industrial facilities around the country.
Make no mistake, messages such as “you are not welcome” and “we want to close you down”, or in the case of the Victorian Government, “we are going to triple your resource royalties”, are heard loud and clear by business and investors right around the world.
It is now absolutely clear with the closure of Hazelwood, the loss of more jobs and the threat to others, that we must have a policy environment which supports business rather one that deliberately drives jobs offshore.
There are two components to this.
First, the key input for many businesses – reliable and affordable electricity – cannot be taken for granted.
Over the last decade Australia has moved from a relatively low cost energy environment to one of the more of the expensive in the developed world.
An increasing number of firms, domestic and international, are raising this issue with me.
But Federal and State Labor are wilfully ignoring these concerns.
Consider the state-based renewable energy targets that only do one thing – further increase the cost of energy. Or Federal Labor’s plan to shut down coal generators with a new emissions trading scheme/carbon tax which would punish Victoria’s low-cost brown coal generators hardest.
Worse still, the blackout in South Australia saw major employers like Arrium’s Whyalla steelworks, BHP Billiton’s Olympic Dam, Nystar’s Port Pirie smelter without full electricity supply for two weeks.
While the Weatherill government has tried to suggest it was all due to a storm, the real question is why, in an advanced economy like Australia, did it take so long to restore power?
In a climate of energy insecurity, the imminent closure of Hazelwood represents an additional challenge for energy users where electricity prices have already risen in expectation of the shut-down.
This will flow though to many businesses who are already struggling with the range of cost pressures.
Exactly the same is occurring with Australian households who are also feeling cost pressures from rising energy costs.
Second, we need to develop new reserves of natural gas not just as a low emissions reliable transition fuel but also as a key input into value-adding industries.
We are now at the point where the competitiveness of Australian industry is being undermined by state-based natural gas policies that don’t just threaten future investment, but increasingly, existing investments.
Describing this as a looming crisis is not too strong a term.
When large industrial users cannot access gas supply contracts for any longer than four months or only get a fraction of what they require, it is clear there is a major problem.
Yet despite this, only yesterday we saw the Andrews Labor Government in Victoria introduce legislation to ban on shore natural gas exploration and development.
A more short-sighted self-destructive policy is difficult to imagine.
By legislating against the development of new and potentially significant on-shore natural gas resources the Andrews Labor Government is placing at risk thousands of well-paying industrial and manufacturing jobs in Melbourne and elsewhere.
Just as bad, it will further drive up costs for the millions of Australians who use gas at home for cooking and heating.
To be very clear, future and ongoing investment in manufacturing will be driven by access to reliable and affordable energy, particularly natural gas.
This is a major policy challenge confronting the country and the Commonwealth is leading reforms in this space.
But industry has a critical role in calling out bad policy, particularly when it impacts on energy affordability and security.
2. Microeconomic Reform
2.1 Industry Growth Centres
Our microeconomic reforms complement our macroeconomic tasks.
For example, our $248 million Industry Growth Centres are driving business growth and innovation in sectors where we have existing strengths and where there are strong opportunities for expansion.
The six Growth Centres are in the areas of: advanced manufacturing; cyber security; food and agribusiness; medical technologies and pharmaceuticals; mining equipment, technology and services; and oil, gas and energy resources.
The Growth Centres are setting the long-term direction for these sectors to create opportunities for Australian businesses and researchers.
For example, the Advanced Manufacturing Growth Centre is connecting local manufacturers with global companies, identifying ways to reduce red tape, and building links with researchers.
2.2 Cooperative Research Centres Programme
The Growth Centres are working closely with our highly successful Cooperative Research Centres (CRC) Programme.
The $653 million CRC Programme funds industry-led research partnerships.
Industry is front and centre, with CRCs solving industry problems using research capability, while continuing to produce industry-ready PhD graduates.
We have held new funding rounds for the CRC Programme this year, including two rounds for the new CRC Projects stream.
One successful project from the first round is a collaboration between Melbourne-based company Speedpanel and the University of Melbourne to develop pre fabricated building systems using advanced manufacturing techniques.
2.3 Entrepreneurs’ Programme
We’re also helping businesses to improve their productivity and competitiveness through the Entrepreneurs’ Programme.
The program has provided well over 9000 services to businesses across Australia.
The Entrepreneurs’ Programme has also provided $85.7 million in grants to help entrepreneurs, researchers and businesses commercialise their ideas.
We’ve recently expanded the Innovation Connections element of the program so more businesses can receive matched grants and access expert facilitators.
The Government is investing $23 million in the Incubator Support Programmes which will help to develop innovation ecosystems in metro and regional Australia.
This is a key element in the Prime Minister’s National Innovation and Science Agenda.
3. National Innovation and Science Agenda
3.1 First Wave
Turning to the third and final element of our strategy, we are investing more than $10.1 billion in supporting innovation, science and research in 2016–17.
This is more than 50 per cent above the government’s investment a decade ago.
The National Innovation and Science Agenda is ensuring we maximise the return on this investment.
We have amended the tax system to encourage investors to direct their funds towards high-growth, innovative start-ups.
We are boosting women’s participation in science, technology, engineering and mathematics.
We have launched the $500 million Biomedical Translation Fund which will invest in promising biomedical innovations.
And the $200 million CSIRO Innovation Fund will support co-investment in startup companies’ products and services created by our research institutions.
We’re also consulting the community on how to maximise benefits from the R&D Tax Incentive, which accounts for a third of our investment in innovation.
3.2 Second Wave
We are now hard at work on the second and third waves of the agenda.
The second wave will focus on further encouraging private sector investment in innovation and supporting new infrastructure for science.
We’re setting up the Biomedical Translation Fund and CSIRO Innovation Fund, but there is still a mid-level gap for commercialising technologies.
I will continue to explore options for ensuring investment capital is available in areas where it is difficult to find capital to commercialise good ideas.
Big Science infrastructure is the other component of the second wave.
Access to leading-edge infrastructure is critical to scientific endeavour.
The Government has committed $2.3 billion over 10 years to support research infrastructure, including the Australian Synchrotron, the Square Kilometre Array, and the National Collaborative Research Infrastructure Strategy.
We have also reached a $70 million agreement with the research and business communities to build the world’s first silicon quantum computing circuit.
The task now is to find the next Synchrotron or Square Kilometre Array.
Therefore, the Government has asked Australia’s Chief Scientist to complete development of a National Research Infrastructure Roadmap this year.
3.3 Third Wave
The focus of the third wave of the agenda will be twofold.
First, we’ll continue to make it easier for business to interact with government and reduce unnecessary regulation.
We want to target unnecessary duplication across the three levels of government.
Second, we’ll be helping industry sectors adapt to the future.
In part, this will be guided by the 2030 Strategic Plan for innovation, science and research being developed by Innovation and Science Australia.
We will also promote business innovation by harnessing industry know how—strengthening links between Growth Centres, CRCs and institutions like CSIRO.
I also want to work with universities on developing precincts of expertise, and in doing so boost private sector investment in science and research.
Private enterprise ultimately generates jobs and prosperity, so industry policy must be designed to provide the best environment for businesses to flourish.
We don’t need to choose between so called ‘old’ and ‘new’ industries.
We need to nurture globally competitive firms in all sectors of our economy because all sectors bring opportunities for long-term sustainable jobs.
The Australian Government is addressing challenges at the macro and micro levels, and ensuring our policy settings are right for businesses to innovate.
Industry policies effectively linked to innovation and science drivers are vital to Australia’s future.
After all, this is not just about the jobs of today, but those of tomorrow and the future.
I look forward to hearing your views and continuing to work with you on our agenda.