E&OE…
DAVID SPEERS:
Greg Hunt thank you for your time. Can I say right up front the panel that's done this review for you has found the existing R&D incentive program falls short of meeting its stated objective and presents a lost opportunity for the $3 billion that's being invested. Do you agree with that core finding at the start?
GREG HUNT:
Well the reason the Government sought this review was there were questions as to whether what is a very successful program was achieving all of its objectives.
Now that really falls into two categories. Is there stronger integrity that can be put in place? In other words, are there any rorts? And then secondly, can we get a better bang for the buck? Can we get more investment and more R&D and therefore more jobs in science and in new firms and existing firms?
So this is about at the end of the day, can we get more jobs for Australians? The whole reason we held this review is we think there can be. I won't obviously speculate on any individual measure…
DAVID SPEERS:
I appreciate that, but…
GREG HUNT:
We're going to now go and consult genuinely with the public and with the sectors.
DAVID SPEERS:
You agree it needs change, you agree that it's not achieving what it could achieve?
GREG HUNT:
Look there is a view that has been widely held within the sector, within the science community, within the universities that we can get better bang for our buck.
DAVID SPEERS:
And that's your view too?
GREG HUNT:
My view is that I think we can get an even better outcome. But on individual measures, I think the panel's report because it comes from people such as Bill Ferris, the head of Innovation and Science Australia, Alan Finkel, our extraordinary Chief Scientist and the head of Treasury John Fraser, so they've put forward recommendations.
We'll now proceed in three stages of consultation out to the public until the end of October. Further discussions with the public and then we'll respond as part of a broad second wave of our National Innovation and Science Agenda, or if you think of it this way: productivity and jobs agenda by the end of March.
DAVID SPEERS:
I know you won't say yes or no to the particular recommendations just yet but could we just talk a bit about them, recommendation two: a 20 per cent bonus essentially when a business collaborates with a publicly funded research organisation, a university for example or a 20 per cent bonus if they employ a PhD graduate for the first three years, why would that be a good move?
GREG HUNT:
So this is actually about driving people into science and driving more research with our universities. What are we really good at as a country? We are brilliant at creating new ideas. What are we not as good at? We're not as good at collaborating.
Now collaborating basically means the different arms of the system working together – the universities and the private sector.
This is a proposal to drive the private sector and the universities closer, to bring the CSIRO into it, because that of course would be covered and to really bring young people into science.
For example, we need 20,000 engineers a year in Australia. We train 12,000 and some of those come from overseas, so we have to import about 8000, to get young people into engineering and science but to provide incentives that will help pull them through the system.
DAVID SPEERS:
And one of the other recommendations, number three, placing a $2 million cap on the annual cash refund that's available. You used the word ‘rorts’ earlier on, is that happening at the moment? Are people claiming way too much, more than they should?
GREG HUNT:
So what this is about, to explain the system to people, there are really two types of claims under what's called the R&D tax incentive. There are tax refunds where you actually get the cash back even if you've made a loss and that's for firms below 20 million in turnover. And then there are tax offsets for firms above that and there is some concern that firms are claiming for very, very significant amounts over and above what could be seen as reasonable, but I'm…
DAVID SPEERS:
Is that happening much?
GREG HUNT:
Well the approach of the reviewers was to say that they believe there was a case to lower the cap for cash. Remember this is a cash refund where firms have made a loss. Now I think that is a very important part of the system, because…
DAVID SPEERS:
Is it being rorted though?
GREG HUNT:
…my job is unashamedly to make sure that there is integrity, so I'll frame it that way.
DAVID SPEERS:
Yeah but is that the view of the panel or your view that it is being well rorted by some?
GREG HUNT:
Well the panel's conclusion was absolutely crystal clear that they believed that as the system operates now, there are clearly some claims which might be called rorts or might be called playing within the system but shouldn't proceed going forward. You absolutely have to have that cash back…
DAVID SPEERS:
You have to tighten that up.
GREG HUNT:
Absolutely. But you have to have that cash back but the question is whether or not there should be a reasonable cap or limit and that's what not just the Secretary of the Treasury but two of Australia's great researchers, innovators, and businesspeople in Alan Finkel and Bill Ferris have recommended.
So we’ll deal with that, but remember all of this is part of getting rid of any rorts and adding new jobs and new investment in innovation and this is about a broader whole second wave and then a third wave of the National Innovation Agenda, which is private sector investment, public sector science for the second wave and the third wave is business simplification and then building our university precincts where we collaborate.
DAVID SPEERS:
We do hear the Turnbull Government talk a lot about innovation but over the last year Australia's fallen from 17th to 19th on the Global Innovation Index.
GREG HUNT:
That was primarily about figures from two and three years ago.
DAVID SPEERS:
Alright but and then we see in the omnibus savings bill which has just passed through the Parliament a couple of weeks ago that you are cutting this R&D tax incentive?
GREG HUNT:
Well in fact what we've done is brought that back to a very generous 43.5 per cent rebate when people make a loss or a 38.5 per cent tax offset where larger firms are making a profit so those are still extremely generous…
DAVID SPEERS:
It's a cut, it's a cut though, it's a cut.
GREG HUNT:
It's making it sustainable and that's an honest answer.
DAVID SPEERS:
And as part of this review do you rule out any further cuts?
GREG HUNT:
Well my goal is to actually see our overall national R&D budget to continue to grow and then our overall combination of national budget R&D support and private sector to significantly grow.
DAVID SPEERS:
And for the Government's part will you cut this R&D tax incentive further?
GREG HUNT:
Well I'm not going to speculate on individual measures – it's a legitimate question – we're genuinely going to the public now in three stages, and we will respond at the end of March…
DAVID SPEERS:
Yep, I appreciate that. Is this (inaudible) the Government's investment?
GREG HUNT:
Look, I won't respond, because one of the things in there that is an extremely impressive proposal is the idea of a collaborative premium, or in other words where there is, as you described it – rightly I think – a bonus for working with universities, CSIRO, similar public research organisations and new PhDs.
Now that has enormous prospect for driving overall R&D, and R&D means one thing – investment that creates jobs. In other words, we become more productive. This is what it's all about.
And I have to say, it's not just about new firms, it's about existing firms such as that great hundred-year-old Australian paint manufacturer Dulux. What I've seen with BlueScope on the floor of the plant only last week where they're doing their steel manufacturing in a new way, creating new coatings, creating new jobs…
DAVID SPEERS:
It can also be small, medium sized businesses as well. I mean, this is one of the criticisms that a lot of firms don't understand what they can access with this R&D tax incentive for. It's not just about some scientific breakthrough necessarily, is it? It can be a better way of doing what a small business does.
GREG HUNT:
Well let me give you a couple of examples. We have a firm such as Melbourne Garages in my electorate. I visited them, they've multiplied their business by four-fold over the last four years. How have they done it? They've done it by creating an entirely new business model.
Now for them, we have AusIndustry which can come and give them advice on how they can do their business.
For others we've got the R&D tax incentive, so an example of that might be some of the start-up firms that I saw at the University of Wollongong only last week, where they're doing new ways of developing 3D printing. So it's not just doing the printing but they're a small Australian firm creating 3D printing machines, so they're designing and building.
DAVID SPEERS:
But not everyone's going to come up with a new way of doing 3D printing. And do you accept this is – this talk of innovation and the incentives for this sort of stuff makes a lot of people feel, well, that's just not me, that's just not what I do.
GREG HUNT:
Well I think it is very important that we make it clear to the public, and it's our task and our responsibility to say that innovation is another way of doing new things and thing in a better way.
So for example, what Dulux is doing, they're building a new paint manufacturing plant with over $160 million of investment in the northern suburbs of Melbourne. Construction jobs, manufacturing jobs, all coming from the fact that they've got the people in the white coats doing the R&D in the labs in Clayton. So (inaudible) lead to investment in manufacturing, which are real blue collar jobs, both in construction and in manufacturing.
DAVID SPEERS:
And is that getting to what Cory Bernardi's saying here, when he says overnight, jobs, manufacturing – all those matter to people in Australia. We've got to start talking about that, rather than some of the more flamboyant rhetoric like innovation and things like that which doesn't mean much to a lot of people.
GREG HUNT:
So the way I have presented this role since coming into it is that it's about the jobs of today, which is industry, the jobs of tomorrow, which is innovation, and the jobs of the future, which is science. And in particular it's about new firms, but especially it's existing firms and therefore it's job creation and job security.
You'll have people right across the country, you know, they might be in different roles and different firms and they wonder will I have a job tomorrow or next month or next year? And the only way that you can provide those sorts of futures is by being productive. What's the key for Australia? To be world class competitive.
And I've seen a turnaround. The Nyrstar firm, which has been a lead smelter in Port Pirie, it's innovated and become a multi-metals recycling firm. In other words, it's taking in waste product from around the country and indeed, to my surprise, from around the world.
They've invested in a new plant, they've bought the local community in. This is the ultimate blue collar employer in a community, and it's staying and thriving because they're investing, and the workers are coming up with the ideas to help drive that forward.
DAVID SPEERS:
Which is great. Are they going to the communities though, that – I mean, look at Geelong, look at Broadmeadows. End of next week the last Ford Falcon in Australia is going to roll off the line, and it's those communities that are very nervous, understandably, about what their future holds.
GREG HUNT:
So I think that's the very important point. In the case of Broadmeadows, the new Dulux plant will be in Melbourne's northern suburbs.
As I say, construction jobs, manufacturing jobs. In the case of Geelong, what you're seeing there is a firm such as Carbon Revolution, so that's on the Deakin University campus, one of the big parts of the third wave of what I want to do with innovation and science, that is…
DAVID SPEERS:
Is a Ford worker going to end up on the Deakin campus working in carbon innovation?
GREG HUNT:
Yes. I've met the workers that are doing that. So what does Carbon Revolution do? Carbon Revolution makes the world's best carbon fibre wheels. In other words, light wheels which are being exported directly to Ford for their high performance vehicles in the US. Who are the very people they're looking to recruit? Ford workers.
But why does the Australian car industry stop in terms of manufacturing? It's because we weren't world class competitive. So the message is really clear – you've got to be competitive. In order to be competitive, you've got to have productivity, and doing new things drives productivity, which is what this whole report's about.
The other point here is that when you look at how Australians think and create, we are naturally creative. So if we can bring our different sectors together and bring private sector investment in, private sector investment is going to drive the jobs and give people a real future. And that's as much the case whether you're a small business, a medium business or a large business, and this is the real manufacturing future.
It's why Lockheed and Boeing have both said they're setting up new precincts in Australia. An incredible outcome only in the last two months.
DAVID SPEERS:
Minister, we'll have to leave it there but thanks for joining us.
GREG HUNT:
Pleasure.
(ENDS)