Australian Industry Group welcomes the release of the Government's Strategic Examination of Research and Development (SERD) response but warns that a single proposal will worsen one of the independent report's own central findings that Australia's business R&D investment is dangerously low and that lifting productivity is urgent.
"The crucial report in Australia's R&D framework comes at a time when we are living through a period of profound geopolitical and economic disruption. Supply chains are being redrawn, trading relationships are under pressure, and the global competition for high value industries is intensifying. Business-led R&D and commercialisation as well as productivity growth are how Australia can stay in the game," said Innes Willox, chief executive of the national employer association, Australian Industry Group.
"The R&D Tax Incentive (RDTI) is one of the few levers that directly rewards businesses for investing in their own future. What is being proposed by the Government in response to the report removes the incentive as a potential support for thousands of Australian businesses that need it most.
"The Government's proposal to raise the minimum R&D expenditure floor from $20,000 to $150,000 was never canvassed in any issues paper, never raised in public consultation and never discussed at roundtables conducted by the review. It now appears as a policy proposal without obvious analysis or justification.
"A significant number of Australian Industry Group members currently accessing the R&D Tax Incentive could lose eligibility under the Government's proposal. This decision will reduce business expenditure on R&D, not increase it, which is the opposite of what the report calls for.
"The proposed substitute – a $150,000 competitive grant to partner with a university – shows a complete and fundamental lack of understanding of how to help SMEs increase their levels of R&D.
"Australia's productivity growth has collapsed from 1.2 per cent a year before the pandemic to just 0.2 per cent. Business R&D is one of the most powerful levers we have to reverse that. Raising the RDTI expenditure floor is not simplification. It is exclusion.
"Excluding businesses from the innovation system while lamenting their low R&D investment, at a moment when the world is moving faster than ever, is a contradiction that must be resolved before implementation proceeds.
"The Government's response also leaves the commercialisation / translation gap unresolved. Australia produces world class research. Too much of it never reaches fruition. IP commercialisation pathways, translation-focused funding and industry engagement mechanisms were raised throughout the SERD process and have been pushed into the too hard basket that might be addressed by 'National Strategic Initiatives' in the future.
"Australian Industry Group welcomes commitments to a national innovation strategy, streamlined grant programs and a production tax credit for advanced manufacturing RD&I activities.
"However, the RDTI threshold change requires immediate consultation with industry before it proceeds. Australian Industry Group stands ready to work with government and all stakeholders to deliver the productivity, commercialisation and economic resilience Australia urgently needs.
"We thank the SERD panel for their consultation and dedication to their task. This work has provided an opportunity to kickstart the business investment in R&D that we desperately need. It is truly unfortunate that one misguided government proposal in response threatens to undermine much of their good work," Mr Willox said.
