Supporting an Innovation Nation

by Yasser El-Ansary, Chief Executive, Australian Investment Council

Australia is at an important crossroads when it comes to our status as an innovation nation.

The impact of the global COVID-19 pandemic across every sector of our economy has clearly been significant. And while there is no question that every business has been impacted in some way as a result of the pandemic, there is right now a unique opportunity for Australia to reimagine and reshape the national economy for the future – a future where our economy is recognised for being more innovative and more dynamic then we ever have been before.

Expanding the investment pipeline and continuing to support the transformative power of innovation and technology, must form the central pillars of a more dynamic and agile Australian economy over the years and decades ahead of us.

Australian jobs and industries rely on a steady flow of domestic and offshore capital to support investment into businesses across all sectors of the economy. Australia’s demand for capital continues to be greater than domestic supply, and as a result, the nation continues to be a net importer of capital. Private capital firms play a vitally important role in attracting both domestic and offshore investment capital into Australia, which ultimately flows into job-creating Australian businesses.

The private sector, working in partnership with the government, can be a powerful driver for new innovation and technology-based transformation across the economy. To achieve that outcome, we must use innovation policy to support early-stage businesses in realising their potential across all of the key sectors of our economy.

When we look at the latest available rankings of economic complexity, developed by Harvard University’s Center for International Development, they show that despite Australia’s high standard of living we still have much work to do to transition into a more knowledge-based, high value-adding economy. The Center’s Atlas of Economic Complexity [1] ranked Australia 87th globally – the lowest of all developed economies and lower than many developing countries. Since 1996, when Australia was ranked 57th globally for economic complexity, it has dropped 30 places. In their analysis, Harvard University concludes that “compared to a decade prior, Australia’s economy has become less complex, driven by a lack of diversification of exports.”

It is therefore important that the economic challenges that Australia faces are recognised and tackled through leadership in long-term and visionary policy reforms. Industry as a whole has a role to play in informing and engaging with all sides of politics on these challenges.

There is much work to be done to transition and advance our economy, because quite simply, we haven’t kept pace with the development in complexity and technological transformation of other countries. The Harvard data confirms that.

We must lift our economic productivity and competitiveness, and invest more in skills and talent. These long-term policy shifts will position Australia to capitalise on the next wave of economic growth that it within our grasp. Australia’s geographic position within Asia provides with a unique advantage and opportunity that other countries around the world would love to have.

Australia's other comparative advantages must be exploited to the greatest extent possible.

Key policy recommendations that we believe support the case for broader economic reforms are outlined in the Australian Investment Council’s Roadmap to Recovery policy paper, released in June 2020. In our view, the three pillars of Australia’s future economic prosperity must be:

1. maximising the penetration and utilisation of technology as an enabler of economy-wide productivity growth and job creation;

2. going ‘narrow and deep’ in developing industries where Australia is, or could be, a world leader; and

3. supporting Australia’s entrepreneurs and fast-growth businesses to create Australia’s next generation of world leading businesses.

To realise the economic gains from the scaling-up phase of early stage businesses, it is imperative that initiatives are put into place now to support the ongoing investment needed to sustain and grow our innovation ecosystem.

Core policy solutions that will help grow the pool of capital available to support investment into Australian businesses and create employment opportunities for the future include:

1. Introducing a new public and private sector co-investment funds to support Australian entrepreneurs and Australian fast-growth businesses.

2. Filling skills and talent gaps in the short-term and building a training and education pipeline that will support Australia’s growth industries over the long-run.

3. Implementing meaningful reforms to lift the competitiveness of our taxation system and our capacity to attract inbound investment from offshore.

4. Investing in hard and soft infrastructure to support the growth profile of the economy over the next two decades – utilising technology as a core enabler for the future.

5. Fast-tracking the reduction of red tape and introducing greater efficiency to our regulatory environment.

The COVID-19 global pandemic has been catastrophic for communities and economies all over the world. But in the words of Churchill, ‘never let a good crisis go to waste’ – Australia must be brave in the face of adversity and prepare ourselves now for a future where knowledge and innovation are the new currencies of leadership.

[1] Harvard University Center for International Development Atlas of Economic Compexity September 2020