The Business Council says one way Australia's lagging productivity could be turned around, is by significantly boosting investment in research and development, including with changes to tax settings, programs to incentivise risk and better collaboration between universities and business.
Business Council Chief Executive Bran Black said business wants to step up and improve productivity by investing more and generating economic growth.
"Supercharging research and development investment in Australia presents a significant opportunity for business and the Government to lift productivity and raise living standards for all Australians," Mr Black said.
"We need a new approach to R&D that starts with incentivising businesses to invest more, otherwise investment opportunities will go overseas, and we will fall further behind."
The BCA is calling for R&D to be a new national strategic priority, with private and public investment increasing to 3 per cent of GDP, and the development of a new 10-year national R&D strategy.
To support this, the BCA has highlighted the following policy priorities:
Get the R&D tax settings right, including reviewing the R&D Tax Incentive definition of R&D and abolishing the tax incentive threshold or increasing it to $250 million.
Develop a suite of tailored incentives that attract new R&D activity to our shores and incentivise the commercialisation of R&D outputs in Australia, including preferential tax treatment for income derived from IP developed in Australia.
Establish a nationally coordinated network of industry-led R&D centres modelled on the UK's successful Catapult Network (which contributes £5.50 in GDP uplift for every £1 invested).
Develop a publicly accessible National Researcher Directory to help connect industry with research expertise.
Research and development is critical to how we find solutions to our biggest challenges, and yet Australia's investment in R&D has fallen to 1.7 per cent of GDP, which is below the OECD average of 2.7 per cent (see figure one) and well below leading R&D performers like Israel, which spends 6 per cent of its GDP on R&D.
Increasing our R&D spend would unlock a number of economic benefits for Australia, with CSIRO analysis showing that every $1 spent on R&D generates an economy-wide return of $3.50.
The BCA believes a national R&D strategy should build on Australia's natural advantages and strengths, especially in relation to resources, renewables, agriculture and health. The approach coordinated by both government and industry should also identify new opportunities in areas like AI, quantum, battery technologies and cyber.
"R&D is crucial to ensuring we have a future made in Australia, expanding our current industries and opening up new sectors like quantum, advanced manufacturing, cyber and artificial intelligence," Mr Black said.
"We need a national R&D strategy that helps incentivise businesses, researchers, investors and government to work together to overcome our biggest challenges, like the energy transition."
"Building new industries takes time and money, and amending or ideally removing the R&D Tax Incentive threshold cap would ensure R&D-intensive companies invest and innovate in Australia.
"Part of our strategy needs to include better collaboration between universities and industry to identify where there are opportunities that can be commercialised."
The BCA is prioritising R&D commercialisation as a key opportunity to grow productivity and welcomes ongoing collaboration with the Government through its Strategic Examination of Research and Development.
The BCA's submission to the Strategic Examination of Research and Development is now online.
ENDS
Figure one: Australian Gross Domestic Spending on Research & Development
