Australians now live much longer, healthier, and more fulfilling lives, and Australia has some of the highest standards of living in the world thanks in large part to technological progress.
The benefits that innovation has brought to our lives are all around us in the quality of life that Australians enjoy and the meaningful work we undertake. This is why innovation continues to be critical for Australia’s future, and why this plan is ultimately a plan for the sort of society and economy all Australians can aspire to create for themselves and their children by 2030.
In a world that continues to become more interconnected and complex, innovation is becoming more and more critical to national economic performance, job creation and standards of living. As the historical drivers of our productivity growth wane, we need to strengthen our capacity to generate value from our ideas and our inventiveness. Rather than being fearful of the disruption and change that technology will inevitably bring to all countries, Australians should see in these transformations the seeds of renewed growth that can sustain our enviable prosperity and quality of life. We are well placed to take advantage of these opportunities, and we can therefore be confident, but not complacent.
ISA has developed a strategy looking out to 2030 to advise the Australian Government on how to generate and capture more of the benefits of innovation for Australians. The strategy makes 30 recommendations which are framed in the context of five strategic imperatives:
As an enterprising and ambitious country, standing still is not an option. By putting our energies into creating a world-class Australian innovation system, we are giving our children the best chance at thriving in an Australia that successfully navigates a dynamic future.
ISA’s report to the Australian Government—Australia 2030: Prosperity through Innovation (the 2030 Plan) sets out the path to a more innovative Australia in 2030. However, innovation is not solely driven by government, so it’s up to all Australians to make our innovative future a reality. For further information on the 2030 Plan see ISA’s website: www.industry.gov.au/ISA.
Innovation and Science Australia’s vision for 2030 is that Australia will be counted within the top tier of innovation nations. We will take pride in our global reputation for excellence in science, research and commercialisation.
Our world-leading strengths in innovation, science and research will benefit all Australians through:
The 2030 Plan highlights a number of themes that will shape the future landscape that our innovators will help us to create and to navigate:
In recent decades Australia has benefited from a favourable move in its terms of trade during an expansionary period in its exports of commodities. However, this contribution to national income growth is now forecast to be -0.5 per cent through to 2025. Australia must offset the impact of this expected decline in the terms of trade by developing new sources of income and improving domestic productivity and growth, to improve GDP per capita by 2025. Innovation drives productivity and in the long run, productivity growth is the key to increasing the living standards of all Australians.
Because improving employment growth and labour productivity alone will not be enough to close the growth gap, Australia will also need to improve capital and multifactor productivity. How well we use digital technology will be critical in this challenge. Digital technology increases the productivity of existing practices and creates new domestic and export markets and services that expand growth. Greater adoption of digital technology could increase Australia’s annual GDP growth rate by 0.7–1.2 per cent.
Over the past 70 years, the nature of work in Australia has transformed. The first major shift was a gradual transition in the industries Australians worked in: jobs in construction, manufacturing, mining and agricultural decreased while service sector jobs increased and now employ 80 per cent of Australians. A second shift is now underway involving an increase in interaction jobs (involving more complex human interactions and judgements) and a decrease in production and transaction jobs.
The skills needed to perform jobs are also changing. Digital skills and skills relating to science, technology, engineering and mathematics (STEM) are increasing in importance, and occupations currently requiring STEM skills are outstripping overall employment growth. At the same time, jobs across the board will require employees to spend more time using 21st century skills, including interpersonal, creative, problem-solving and entrepreneurial skills. These trends mean our education system needs to develop and support both STEM skills and humanities, arts and social sciences (HASS) skills that nurture interpersonal skills such as empathy and creativity.
Given the mix of future occupations is uncertain, but the skills needed to perform them are clear, it is important that Australia’s education system provides the right foundation of skills to give every child the best chance in life, and provides the lifelong opportunity to retrain throughout their working life.
Australian companies operate in a fundamentally different business environment to the one they knew at the start of the century. They have a greater ability to seize global market opportunities, enabled by digital technology and the rise of emerging country economies. They also face stiffer competition.
Australian firms are operating in an environment where companies that can solve a global need using technology can scale fast and generate significant financial value. The countries that generate globally successful firms benefit disproportionately in the global economy because the firms create most jobs in their local market. However, Australia’s business R&D investment is low relative to our peer competitor countries, highlighting that Australian companies will need to increase their efforts to scale, innovate and become more productive to thrive.
Opportunities in the next decade will be amplified and accelerated by the ubiquity of technology in our lives, the pace of innovation, and the scale of adoption. Digital technologies will combine with asset-intensive domains like healthcare and agriculture to create more value for consumers, and new methods for competing. A suite of new digital technologies, such as machine learning, optimisation, artificial intelligence, sensing, robotics, visualisation and distributed ledgers, are opening new opportunities for innovation.
Although Australian companies have generally been ready adopters of digital technology, there is still room for growth. Around 15 per cent of global goods and services are now traded on e-commerce platforms, such as Alibaba and Amazon. These platforms are also serving as the launch pads for thousands of small-sized and medium-sized enterprises, giving them the reach to challenge larger companies. Although there are significant benefits for businesses who can scale and adapt quickly, there are also risks for incumbents as new business models disrupt traditional markets and services. The key for Australia to capitalise on these opportunities is to combine our core strengths on asset-intensive physical domains with emerging digital technologies and economic structures.
Science, technology and innovation are instrumental in meeting Australia’s rising demand for public services, and tackling Australia’s biggest social and environmental challenges, including improving health outcomes, increasing public safety, and decarbonising the economy. Tackling our national challenges is not the job of governments alone. Australia has a world-class pool of researchers, and an increasingly powerful technological toolkit, created by concurrent improvements in the performance and cost of complementary technologies such as genome sequencing, low-carbon energy, machine learning, AI, optimisation, visualisation, sensors and robotics.
The strength of Australia’s local talent—and advances in technology and science—mean we need to raise our aspirations as a nation about what we can achieve. One example is the opportunity to integrate genomics and precision medicine into our healthcare system to ensure that Australia continues to be one of the healthiest countries on Earth. Genomics is the study of genomes, our complete DNA, and it will play an important role in improving health outcomes through early diagnosis, preventative health, and safer and more personalised treatments. Australian researchers can use genomics to build on advances in precision medicine to tackle key causes of death and disability, and to accelerate access to breakthrough treatments to deliver better and more affordable health outcomes.
ISA’s vision is that Australia has a world-leading education system that equips all Australians with the skills and knowledge relevant to 2030. Realising this vision is the first imperative of this plan because providing a world-class education is fundamental to Australia being an innovative and fair country. Education determines the capability of workers and entrepreneurs, and therefore the economy’s productivity and innovation capacity. Education also shapes Australians’ life opportunities.
PISA = Programme for International Student Assessment
Note: The left-hand axis refers to total public funding per student, which in constant dollars has increased by 15% over the period. The righthand axis refers to average PISA scores, which from 2006–07 to 2015–16 have declined by 3% in scientific literacy; and from 2004–05 to 2015–16 have declined by 5% in mathematical literacy and 3.5% in reading.
Source: OECD Programme for International Student Assessments 2015, Results by country, <http://www.oecd.org/pisa/>; Productivity Commission 2017, Report on government services, Chapter 4 School education attachment tables, <http://www.pc.gov.au/research/ongoing/report-on-government-services/2017/child-care-education-and-training/school-education>.
One of the key challenges for this imperative is that Australian school system performance has declined in the last decade, both relative to other countries and in real terms, even as funding per student has grown. The decline is particularly acute in core STEM subjects, such as science and mathematics.
ISA’s vision is that by 2030 Australia will accelerate growth and exports by Australian businesses by strengthening a competitive and productive business environment.
BERD = business expenditure on research and development; R&D = research and development.
Note: BERD has only been reported biannually since 2011. Data for missing years are an average of each adjacent year (e.g. BERD for 2012 is the average of 2011 and 2013).
Source: Australian Bureau of Statistics 2017, Research and experimental development, businesses, Australia, 2015–16, cat. no. 8104, ABS, Canberra, <http://www.abs.gov.au/ausstats/abs@.nsf/mf/8104.0>; Australian Government Department of Industry, Innovation and Science 2017, Science, research and innovation budget tables, DIIS, Canberra, </innovation/reportsandstudies/Pages/SRIBudget.aspx>.
One of the key challenges for this imperative is that innovation in Australia’s firms, as measured by R&D expenditure by business, is lagging behind global peers, and has in fact been declining since 2008. ISA recommends that government should make it the top priority of innovation policy to reverse this decline.
ISA’s vision is that by 2030, Australian governments will facilitate innovation through the regulatory and policy environment; procurement and major programs and projects; and through role modelling innovation through service delivery.
Note: The values reflect the aggregate of all contract values reported in AusTender in each financial year ending in the year indicated.
Source: Australian Government Department of Finance 2016, Statistics on Australian Government procurement contracts, Department of Finance, Canberra, <http://www.finance.gov.au/procurement/statistics-on-commonwealth-purchasing-contracts>.
Key roles of Government are to (1) provide a flexible regulatory environment that assists technological change, (2) leverage government data as a catalyst for data-driven innovation, and (3) incorporate innovation opportunities explicitly into procurement decisions. Government spending on procurement is a significant economic driver in Australia.
ISA’s vision for Australia’s R&D sector is to maintain the excellence that has become its hallmark, while increasing the incentives for collaboration and commercialisation. Despite significant and positive policy changes that have been made in this area in recent years, ISA believes more can be done to break down barriers between the research sector and industry, and to build stronger connections between the two.
BERD = business expenditure on research and development
HERD = higher education expenditure on research and development
GOVERD = government expenditure on research and development
Universities, publicly-funded research agencies (such as CSIRO), research institutions, and industry generate high-quality research outputs, train new research talent, actively find new opportunities to collaborate, and investing financially in R&D activity. However, whilst recent signs of progress are encouraging, more needs to be done to improve our rates of collaboration and commercialisation.
ISA’s vision is that Australia seizes the opportunity to add a more ambitious chapter on innovation to our evolving national stories. We see a future as an innovation-strong nation that is also innovation proud. We believe the Australian Government has a strategic opportunity to use “National Missions”—large-scale initiatives catalysed by governments that are designed to address audacious challenges—to accelerate Australian innovation and encourage more collaboration across the innovation system.
OECD = Organisation for Economic Co-operation and Development
Source: Organisation for Economic Co-operation and Development 2017, Better life index, OECD, Paris, <http://stats.oecd.org/Index.aspx?DataSetCode=BLI>; Organisation for Economic Co-operation and Development Health expenditure and financing data, per capita (current prices), OECD, Paris, <https://data.oecd.org/health.htm>.
While aspiring to be the healthiest country on Earth sounds ambitious, Australia currently achieves an average life expectancy of 82.5 years – the 6th-highest in the world – through health expenditure per person of only US$4493, the 14th-highest in the world.
Australia is in a $1.6 trillion global innovation race, where the prize at stake is a bigger share of global wealth, better jobs, and the best access to the products of innovation for addressing societal challenges.
Yet we are falling behind our global peers, particularly in student performance in science and mathematics, and in business investment in research and development. This is more than a canary chirp in our economic mineshaft: it is a clarion call for national action.
Bill Ferris AC
Chair, Innovation and Science Australia