Australia needs a new innovation policy, claims AVCAL

The Australian Private Equity and Venture Capital Association (AVCAL) has provided a submission to the Senate Economics References Committee’s inquiry into Australia’s innovation system. According to AVCAL, Australia is in urgent need of a new national innovation policy to ensure we have a highly dynamic and modern economy in the future.

AVCAL’s submission highlights the need for policy reforms to recognise that innovation is not just about research, but about the translation of that research into usable and productive outcomes. According to AVCAL Chief Executive Yasser El-Ansary, “We’ve continued to ignore the ‘development’ side of ‘research and development’. We have to recognise that supportive innovation policy systems play a critical role in taking research from the laboratory to the marketplace, and this is particularly true for small and medium-sized economies like ours.”

In past years, the Commonwealth Government has spent around $9bn annually supporting research and innovation, with a heavy emphasis on research and industry assistance - but less than 1.5% of this budget has been dedicated to supporting the translation of research into commercial outcomes. El-Ansary  said, “Given the very small investment we make in supporting translation, we shouldn’t be surprised at our relatively poor performance when it comes to commercialisation rates from research in Australia.”

AVCAL claimed that private investment through angel, venture capital and private equity funding plays a vital role in helping to take such innovative businesses to the next level. As noted in The Financial System Inquiry’s interim report in July 2014, “venture capital and private equity funds tend to finance more innovative and high-growth firms. These firms are drivers of long-term productivity growth.”

The association’s recommendations include the following:

• introducing a dedicated translational innovation program with a long-term focus. This should include a new $500m translational innovation fund to attract matching private capital into high-risk but high-potential early-stage companies looking for commercialisation assistance, and a new translational medical innovation fund funded from 10% of the proposed $1bn endowment of the Medical Research Future Fund;
• delivering a consistent tax outcome for all investors in private ventures and SMEs through Venture Capital Limited Partnerships;
• improving existing migration policies to better target innovation building;
• introducing quarterly R&D tax credits for early-stage companies;
• reforming the Employee Share Scheme tax framework for early-stage companies; and
• strengthening the nexus between publicly funded research and economic outcomes.

Separate to the Senate Inquiry, AVCAL has also been advocating for policy changes to be made by the government as part of the National Investment and Competitiveness Agenda, which is due to be released in the coming months.

A full copy of AVCAL’s submission can be viewed here.