Australia

In line with its industrial structure, Australia shows a modest BERD intensity, the relative contribution of high-technology manufacturing being considerably below the OECD median. Innovation output, as measured by triadic patents, is also below the median, while trademark registrations are slightly above. However, Australia has a large share of SMEs and start-ups. Young firms are fairly active in patenting, and administrative and regulatory conditions for entrepreneurship are as good as in most OECD countries. Two major policy instruments used to encourage business innovation are R&D tax incentives and equity funding. The government actually encourages innovation and entrepreneurship in firms of all size and in all sectors of the economy, which is reflected in the radical shift in its policy mix towards non-discretionary R&D tax incentives and the more recent implementation of the NISA. But particular focus has been given in recent years to supporting R&D and innovation in small and young firms. The government replaced the R&D Tax Concession programme with the R&D Tax Incentive programme, which provided more support for SMEs relative to larger companies, in 2011. In 2015, the government committed to undertake a review of the R&D Tax Incentive programme to identify opportunities to improve the effectiveness and integrity of the programme, including how its focus could be sharpened to encourage additional R&D. The results of the evaluation were released in September 2016, with the review report noting the higher responsiveness to the programme of small companies relative to larger companies. Additional funding programmes also target young entrepreneurs and start-ups. A new component of the Entrepreneurs’ Programme, the Incubator Support Programme, provides competitive matched funding in the amount of USD 5.5 million PPP (8 million Australian dollars – AUD) to accelerators in regions or sectors with high innovation potential. The Commonwealth Scientific and Industrial Organisation (CSIRO) Innovation Fund and the Biomedical Translation Fund have both been implemented in 2016. The former invests in new spin-out and start-up companies’ products and in services created by Australian research institutions, while the latter supports promising biomedical discoveries. Young firms’ difficulties to access skills are also addressed through the Incubator Support Programme, which assists them to find top-quality research and technical talent through secondments of national or international expert advisers. Employee Share Schemes (ESS) support start-ups by giving employees options to buy shares in their company as part of their remuneration – an advantage for start-ups, as they can avoid paying high salaries when they are in a financially vulnerable state. The government intends to make ESS more accessible and user-friendly.

Australia has a reasonably favourable business environment. Although the domestic venture capital market is narrower than on average in the OECD area, a reform of the Early Stage Venture Capital Limited Partnerships (ESVCLP) increased the maximum fund size for new partnerships from USD 69 to USD 139 million PPP (AUD 100 to AUD 200 million). ESVCLPs will no longer need to divest a company when its value exceeds USD 173 million PPP (AUD 250 million), and participating companies will receive a 10% non-refundable tax offset on capital invested during the year. Furthermore, concerns over inadvertent breaches of insolvency laws are frequently cited as a reason why early-stage investors are reluctant to get involved in a start-up. As part of the NISA, insolvency laws are currently under review to reduce inter alia the current default bankruptcy period from three years to one year. New legislation is expected to be introduced in mid-2017.

Australia maintains a clear international specialisation in biotechnologies, as measured by the patent-based revealed technological advantage. The Australian Government aims to achieve a world-class economy by building on the country’s areas and sectors of strength. Led by the former Chief Scientist, nine national science and research priorities and related services were developed in 2015 in consultation with researchers, industry leaders and government representatives: 1) food, 2) soil and water, 3) transport, 4) cybersecurity, 5) energy, 6) resources, 7) advanced manufacturing, 8) environmental change and 9) health. The implementation of the priorities is expected, over time, to result in increasing the proportion of Australian Government research investment that is allocated on a strategic basis to areas of critical need and national importance. The Industry Growth Centres Initiative has established or is establishing Growth Centres in six sectors: advanced manufacturing, cyber security, food and agribusiness, medical technologies and pharmaceuticals, oil, gas and energy resources and mining equipment, technology and services). Growth Centres will boost the competitiveness, productivity and innovative capacity of Australia’s key industry sectors by: i) identifying opportunities to reduce the regulatory burden, ii) increasing collaboration and commercialisation between research and industry, iii) improving capabilities to engage with international markets and global supply chains and 4) enhancing management and workforce skills. USD 172 million PPP (AUD 248 million) will be invested over four years from 2015-16.

Australia enjoys strong skills foundations and performs well on skills indicators. Australian 15-year-olds rank fourth in science on the PISA test in the OECD area. Likewise, the level of adult tertiary education attainment is above the OECD median. One of NISA’s four pillars refers to the enhancement of talent and skills. Australia identified a need to raise STEM literacy among pre-schoolers, school students and communities following recommendations from the Office of the Chief Scientist. Between 2016 and 2021, USD 33 million PPP (AUD 48 million) will be allocated to increasing engagement in STEM, including through science prizes, the National Science Week and the “Makers Clubs Programme”. A further USD 10 million PPP (AUD 13.7 million) scheme, “Women in STEM and Entrepreneurship (WISE)”, is aimed at boosting the participation of girls and women in STEM education and careers. Embracing the Digital Age, part of the NISA, comprises several subinitiatives, such as: i) deploying ICT teachers to schools to provide intensive in-class support; ii) expanding the University of Adelaide’s highly regarded Massive Open Online Course (MOOC); and iii) providing up to 100 grants over two years to enhance the implementation of the Australian Curriculum Digital Technologies.

Although Australia performs well on skills-related areas, national sources show that only 16% of its businesses have a high-performance innovation culture. The business sector is not outward-oriented, and business models lack comprehensive innovation strategies. Given the potential to contribute to growth, the government provides an array of initiatives to maintain and foster a culture of innovation under the “Culture and Capital” and “Talent and Skills” pillars of the NISA. Tax reforms are set to decrease risk aversion and spur a new innovation culture. As part of the government’s efforts to raise STEM literacy, Australia targets broader communities – beyond the formal education system – and intends to strengthen community engagement in science and innovation and encourage citizen science.