Chair of the Review of Australia's National Innovation System Has a Few Words. (September 10, 2008)

Dr Terry Cutler, Chair of the National Innovation Review, joined the Minister of Innovation, Industry, Science and Research, Kim Carr, at the press conference yesterday when the green paper was made public.

In response to several questions from journalists he had this to say:

TERRY CUTLER: First of all I'd like to go back to your question about the cost and the size of some of the recommendations we're making. I think it's important to recognise that what we're looking at here is a long term, forward strategy for the country around innovation that will not depend on one budget. This is a direction for the future and I would expect it to be realised over time.

The second thing is, I think, we need to change our language and think - and talk not about expenditure here, this is about investment. And when you look at the quantum of the investments and some of the proposals we're making in this report, it's making the link between, say, our current levels of under-performance in a whole lot of areas are a direct consequence of significant underinvestment over time. So what we're talking about is re-investment to restore our performance.

The issue about risk and failure, it's really interesting when you look at science. We accept failure, the failure of an experiment, the null hypothesis, as positive learning, and we build on that. What we need to do is to apply the same to innovation and firm activity and innovation across the board. The important thing is do you learn from failure and do you fast-fail.

And one of the proposals we've put forward is a greater focus on, sort of tranche venture capital type funding of industry programs, where you have a first phase of proof of concept funding. And a lot of those won't go any further but those that do then go forward. And the bottom line is not to count the successes and failures but, like a venture capital firm, say what's the return on the overall portfolio, because that's the bottom line for the country.

QUESTION: The question about the R&D changes. Will that allow firms to get the credit even if they weren't paying tax?

TERRY CUTLER: Because it - well, firstly, it does two things. It introduces, as Nick [committee member Dr Nicholas Gruen] reminded me, a bias back towards small business and it provides a bias towards companies in tax loss who previously, before the introduction of the more modest tax offset, were not able to claim any benefit of course from the R&D Tax Concession.

Now, these are the firms, particularly in high technology areas like biotech, that often are in tax loss for a long time before they move into profit. So, opening up cash flow for these firms is a huge benefit, one I think is one of the major benefits of this re-jigging of the system that we're proposing.

QUESTION: Sorry to harp on about the costs [indistinct]. How much would that [indistinct] would that change [indistinct].

TERRY CUTLER: That is a hard one to answer because anyone who's dealt with tax measures understands, they're not simple calculations. The real way of looking of that and the way I am sure the Department and the Minister is going to look at that is, if we continued with the current regime, what's the cost over the next few years in terms of trend lines, versus what's the increment or marginal cost here. And I am sure that's something that they'll be looking at in preparation of the White Paper.

[Then in response to a question inaudible on the tape]

TERRY CUTLER: This just goes to a principle where - and one of the challenges that the Minister gave to us in commissioning this review was the apparent fragmentation of industry programs and just the sheer number of them. And so the point we're making in the report was when we come to look at some of the issues around new programs, perhaps around climate change, don't make things worse by having a whole series of new stand-alone programs. Bring them within the umbrella of current institutional arrangements that are in place, so that we get the critical mass, we get the expertise brought to bear on the administration of those programs and they're more cost efficient.