Good morning.

From a Universities Australia perspective, we are deeply appreciative to both the Assistant Shadow Minister and the Minister for providing honest and open overviews this morning on their perceptions of the key challenges facing higher education and the approaches they might respectively take to address them

Listening to our previous two speakers, it is clear there is a high degree of political consensus on one thing at least.

It is the recognition that higher education, research and innovation is the high-performance engine that will drive Australia’s long-term prosperity.

While there may be some disagreement about the fastest and safest route that we can take, agreeing the destination is a great place to start.

I think you would agree that in recent weeks and months there has been a real and rare coalescence of political views about the great challenge that lies ahead for us in Australia.

That challenge is the urgent need to lift our science, research, education and innovation effort to navigate our way through this new era of rapid and dramatic economic and technological change.

The political attention and public prominence given to research and innovation has put a spring in the step of everyone with a conviction that national wellbeing is inextricably linked to ideas, curiosity and research, and the ability to translate this into real economic and social value.

In his remarks after the Innovation Round Table at Western Sydney University a fortnight ago, the Prime Minister noted that the work of university innovators and researchers is ‘absolutely critical to Australia’s future‘.

He has spoken repeatedly about the need to embrace change and disruption if we are to remain a prosperous, high-wage economy with a strong safety net.

This sentiment is likely to be at the heart of the Government’s innovation and science statement to be released before the end of the year.

The Leader of the Opposition has also spoken repeatedly of the role that innovation, research and higher education will play in economic transformation.

In a speech at Monash University last month, he noted the direct link between universities and Australia’s future prosperity.

So it seems we have a window of opportunity.

It is incumbent on all of us – universities, industry, the non-government sector and the research and innovation community more broadly – to work in concert.

Our responsibility to the nation is to assist the Government to formulate the plan that is so urgently needed in positioning Australia for the long-term.

Indeed the very livelihoods and living standards of all Australians depend on the extent to which we are successful in this task.

On 7th October, the Chair of Universities Australia, Professor Barney Glover, released the UA Policy Statement, Keep It Clever.

At its heart is the observation that smart nations are seizing the future with strategic investments in higher education, research, innovation and skills.

The stark reality is that unless Australia does the same, we risk being left behind those that do.

In this context, a key focus of our policy statement is the very clear need to lift the level at which research is translated into “end-use” applications.

To achieve this, we need to build closer ties between Australia’s talented researchers, and the businesses and organisations whose work can be made better and stronger and more competitive through effective research collaboration.

This is my focus today.

I don’t intend to re-hash the statistics on Australia’s poor performance in this regard, or re-prosecute the arguments, that are, by now well known.

Instead, I’d like to take the discussion a step further by drawing on international experience, as well as our own, to identify six key characteristics of successful approaches that can guide our own unique policy position.

In tempering any inclination to simply “grab and go” with the approaches adopted elsewhere, I would underscore a point made recently by Professor Mark Kendall.

Professor Kendall, the inventor of the Nanopatch, notes that while we can learn from others, we must ultimately find our own way to suit our own circumstances and our own particular challenges.

Low levels of research translation and researcher-industry engagement is not recent news.

In fact the Chief Scientist mentioned yesterday that we have been discussing this for about 40 years. So why all the fuss now?

The short answer is because without a dramatic improvement, Australia is at serious risk of being left behind.

The longer answer lies in the fact that Australia is in the early stages of an economic transformation on a scale that we haven’t seen since the industrial revolution.

This has emerged as a perfect storm of change and opportunity created by the confluence of a number of global and national mega-trends.

These trends include an ageing population, a global economic shift from west to east, ever more constrained public budgets, a softening of our economy’s

dependence on natural resources and traditional manufacturing, and most profoundly of all, computerisation and digitalisation.

Computerisation has fundamentally changed the way we communicate and interact.

This has created business models and opportunities arising from the “sharing” economy (think Airbnb and Uber as examples), as well as changing the very nature of the way work is done.

Flatlining workforce participation rates resulting from more workers entering retirement, together with falling commodity prices, means that future productivity growth – from technological advances, new knowledge based industries, and more efficient work practices – will increasingly be called upon to do the heavy lifting in growing and diversifying our national income.

Increasingly, skills, knowledge, ideas and innovation will be our most precious commodities.

Universities have a major role to play in delivering the next wave of Australia’s economic growth and prosperity.

In two key ways.

First, through research-informed education. It is our universities that will produce the highly-skilled graduates that Australia needs to create and fill, not just today’s jobs, but tomorrow’s as well.

The latter task is the trickiest because the labour market that they will find themselves in is so uncertain.

Yet it’s a challenge we are up for and it’s a challenge we can’t dodge because building national wealth demands a creative, innovative and highly adaptable workforce.

Secondly, it is university research programs that will generate the products and industries of the future.

They will improve our health and wellbeing, help solve our most complex problems and provide the bedrock of innovation.

Universities have a unique role in driving innovation as the only institutions that integrate education with research.

They are the incubators of innovators as well as innovation.

This year, we commissioned Deloitte Access Economics to undertake a report on ‘The importance of universities to Australia’s prosperity‘.

I am pleased to launch this report here today.

To my knowledge, this is the first time that the quantitative as well as the qualitative benefits of Australia’s university system have been analysed and assessed so comprehensively.

It paints a clear picture of the enormous contribution that universities make to Australia’s economic and social prosperity.

One of the points that is well made is that Australia’s economic history has been inexorably linked to the considerable and expanding impact that universities have made to the economy and broader society.

My focus today is research and innovation and our Deloitte report contains some compelling findings around the contribution made by universities.

These include:

• The existing stock of all knowledge generated by university research is estimated at almost $160 billion in 2014. This is equivalent to approximately 10 per cent of Australia’s GDP;

• Increasing investments in university research over the past 30 years are estimated to have added $10 billion to GDP each year (in 2014 dollars) over the period, primarily through increases in national productivity;

• The benefits of this improved productivity are equivalent to almost a third of the average growth in our living standards for the period;

• The majority of the benefits from research done by universities accrue to the public; and

• A 10 per cent increase in the stock of publicly supported higher education research can increase Australia’s multi-factor productivity by 3.6 percentage points over the long term.

It is difficult for me to stop at this short research and innovation list of great university benefits when there is so much rich material contained in the report.

I do commend it to you – particularly if you need any convincing that a strong, vibrant, robust university system is the bedrock upon which Australia’s future economic prosperity will continue to be built.

Turning now to better engagement and research translation…

In recent months, we at UA have looked closely at the way things are done in other countries – anticipating the innovation statement and the need for us to be able to contribute constructively to the debate about the policy settings required to encourage greater translation and collaboration.

From this work, we have landed on six characteristics that, in our view, define successful strategies and programs.

These can be a useful guide as Australia evolves its own lasting innovation architecture.

1. Strong government commitment and support

Common to every approach that bridges the gap from idea to end-use and commercialisation, is a strong, sustained and predictable policy and funding commitment from Government.

Government has an important and matchless role to play – not in replicating what others can do, not in replicating private sector roles – but by investing in research and innovation when others won’t.

This is particularly the case where the risk is too high, the internal rates of return too low, the benefits too diffuse or ‘public’, or where the outcomes are uncertain in terms of application and timescale.

Government will also want to ensure that, as much as possible, the longer-term benefits of early stage public investment are realised and accrue to Australia.

Take one of Australia’s most well-known innovation success stories to illustrate the point.

At a critical point in its development, the government financed the commercialisation of the Cochlear implant.

Without this injection of funds, the next stage may never have occurred, at a great loss to Australia and, of course, hearing impaired people all around the world.

This is an example of when things go right – but how much have we lost as a nation because we wouldn’t take the chance in backing a new technology?

Does the name Alfred Upton Alcock ring any bells?

AU Alcock was an Australian inventor and in 1910 he began working on a contraption comprising a wooden platform with an electric motor that drove a compressor and a propeller.

The contraption – or ‘floating traction’ – was tested successfully in front of government officials and the media in Melbourne and Perth and a provisional patent was taken out in 1914.

But poor Mr Alcock was unable to secure financial backing and the patent lapsed.

Some 40 years later, an Englishman, Sir Christopher Cockerell, started fiddling around with the same technology and is now credited as the inventor of the “hovercraft”.

Yet even he struggled to get user interest, famously stating, (when failing to arouse the interest of the military):

“the navy said it was a plane not a boat; the air force said it was a boat not a plane; and the army was ‘plain not interested.’”

Cockerell finally did convince the UK government to invest and a full-scale model was built.

The royalties paid to the UK government funded the UK equivalent of the Australian Research Council for many, many years.

The hovercraft was one of the most successful inventions of the 20th century widely used in providing specialised transport for disaster relief; coastguard, military and survey applications; and leisure and passenger services.

There are two obvious take-outs from this.

And perhaps a third – the third being the injection into the Australian lexicon of a new verb – “to hovercraft” – meaning “to lose the economic and social benefits associated with a great Australian invention through lack of support at a crucial stage of development“.

First, these investments can deliver substantial returns for government.

Strategic investments pay their way.

Secondly, the example serves to highlight the important role of government as a crucial and necessary player in the national research and innovation ecosystem.

This includes ensuring that our big and exciting breakthroughs are taken to the next level.

And what could be bigger and more exciting in the world of research and innovation right now than quantum computing?

Many of you will recall that earlier this month Professor Michelle Simmons and Professor Andrew Dzurak from the University of NSW announced their team had cleared a major hurdle in bringing unimaginable computer processing speeds to the world.

The possibilities of this ground breaking research are immense.

Their work has put Australia at the international forefront in quantum computing.

In excess of $100 million has already been invested by the Australian Research Council, the US Government, the University of New South Wales, and the Commonwealth Bank.

Now further investment is required for the next stage, including for the building a prototype quantum computer.

The team is running a heart-thumping race to make it across the finishing line before their competitors.

The UK government has injected a weighty £270 million ($590 million), and the Dutch Government and industry is committing an equally hefty €135 million ($215 million) in an effort to get there first.

Winning the race will require a substantial further investment.

If not sourced from Australia, the team will need to look elsewhere, risking another great Australian breakthrough climbing aboard the hovercraft.

Given what is at stake, it is highly unlikely in my view that the Government will not come to the party in some way.

But this should occur, not as a “one-off” payment, but through a publicly funded mechanism that (preferably) leverages private investment at crucial stages of development for any, and all, similarly worthwhile projects.

Achieving maximum bang for taxpayer buck, however, requires a prudent and focussed approach.

These investments must be strategic, prioritised and guided by clearly defined principles and criteria.

2. Evidenced-based goal setting

If I were to propose a goal for an Australian research and innovation strategy, it would be: “to increase the flow of economic and social benefits to Australia from investing in research and innovation“.

The most successful international strategies and programs are defined by clarity of goal and purpose.

They are designed not around popular preconceptions, but by taking account of evidence of system weakness or failure.

For example, in the United Kingdom, they have a clear goal of increasing the flow of knowledge between research and industry.

This is achieved through a suite of programs each designed to meet specific objectives on both the supply and demand side of the innovation equation.

The programmes are regularly evaluated, not just individually, but in concert to ensure that the system as a whole is delivering the change being sought.

At the program level, success must be determined by the outcomes as assessed against policy intent and strategic need.

We have a great deal of data and information and we must ensure that policy is evidence informed rather than it being the product of contested opinions.

There has been quite a bit of discussion recently around the efficacy of the $2.9 billion per year R&D tax incentive and whether this is the best mechanism for driving additional business innovation.

Most countries provide support for business research and development and collaboration through a mix of both direct and indirect measures.

Australia is unique in the level of dependence that it has almost exclusively on an indirect tax incentive.

This incentive has grown from around 15 per cent of total science, research and innovation spending in 2005-06 to almost 30 per cent in 2014-15.

Yet the percentage of “innovation active” firms has dropped to 42 per cent and Australia still sits at the bottom of the OECD for the percentage of these firms undertaking research and development.

The review of the R&D Tax Incentive, currently underway presents an ideal opportunity to re-visit the incentive to ensure the return to the Australian community from the significant income foregone is maximised.

At this stage, I’d have to say that it is difficult to be confident that indirect measures provide better value to the taxpayer than direct industry support.

If it is to be retained, in Keep It Clever, we suggest that the measure should be a premium rate to be accessed by businesses collaborating with universities on research and development and innovation.

3. Complementarity and coordination

Program complementarity and coordination is essential.

As I mentioned earlier, the best systems are comprised of mutually reinforcing programs that fill the spaces within the innovation system where they fit best.

At the innovation roundtable recently convened by the Prime Minister at the University of Western Sydney, the emphasis was on systemic reform – not fragmented, programmatic, or piecemeal change.

To assist in providing a systems approach, successful nations typically have an arms-length, expert innovation body serving as a trusted source of advice and support to government, business and researchers.

For example, in Finland, the innovation agency, Tekes, administers a suite of programs including those aimed at supporting business development for young innovative companies, pre-commercialisation of research, small collaborative research projects, and large collaborative research centres.

It works hard to make sure its programs are complementary and coordinated, both internally and with other government programs.

In “Keep It Clever“, Universities Australia has recommended the creation of an innovation board, similar to Innovate UK.

We propose that it would comprise senior representatives from government, industry, universities and the research community in providing strategic policy and program advice, coordination and leadership.

4. Strategic and focussed investment

Discussions about the need for “strategic and focussed” public investment often falter when pejoratively dismissed as “picking winners”.

With limited resources available surely deploying them as efficiently and effectively as possible must be the key objective?

This means identifying and funding – although, while not exclusively – research priorities developed on the basis of comparative advantage, local need and circumstances, and identified strategic gaps.

This is what successful nations do.

The UK, for example, has identified eight great technologies with multiple applications, where it has strong research and business capability, including synthetic biology, robotics and satellites.

Having identified these technologies, they are now investing heavily in them.

In 2013, the then Minister, David Willetts observed quite correctly that:

“while strong science and flexible markets is a good combination of policies, it misses out crucial stuff in the middle – real decisions on backing key technologies on their journey from the lab to the marketplace”.

5. Policy durability and continuity

Australia’s research and innovation system has suffered, and resources have been wasted, when we have taken a short-term, piecemeal approach.

With every change of government comes, more than benign re-badging and re-branding of initiatives and departments.

Such changes often also herald the abolition of successful programs, substantial reductions in the funds available, fundamental design changes, and new programs – which stakeholders are typically nervous to access, out of fear of them being abolished.

Commercialisation programs are a case in point.

Worthy programs have been abolished and semi-revived on a number of occasions, each time with less funding, more uncertainty and little demonstrable improvement in rates of commercialisation.

Not only is this deeply frustrating for applicants, it is also a regrettable waste of public money.

Successful and well-regarded programs are long-lived and broadly supported across the political divide.

They are evaluated and modified but endure while-ever the need can be demonstrated.

The very well regarded US Small Business Technology Transfer (STTR) program, for example, has been in place since 1994 and has been a great success in lifting the level of commercialisation by small and media sized enterprises of publicly funded research.

Another favourite of ours, the UK’s Knowledge Transfer Partnerships (KTPs) that supports PhD and Masters research students be placed in business, has been going since 1975.

6. Scale

Finally, we need to invest at scale.

While much can be achieved from well-targeted small investments – the International Science Linkages program is a case in point (though that no longer exists), – big and enduring change requires substantial investment.

If we are half-hearted in our investment effort, not only will we fail in what we are seeking to achieve, we risk under-utilising the dollars that we do invest.

In 2014-15, Innovate UK invested over AUD$1.2 billion dollars in direct support for innovation.

Notwithstanding that the UK’s GDP is around twice ours, this is an order of magnitude more than has been contemplated in Australia.

With one fifth of Australia’s GDP, Finland funds it’s highly effective innovation agency, Tekes, to the tune of AUD$883 million per year.

As stated at the outset, Australia has many excellent programs that, to be more effective, should be scaled up.

Our Cooperative Research Centres program, in place since 1991, is highly regarded all around the world for the level of researcher-industry collaboration.

But it is simply too small to deliver the widespread cultural shift that we need.

In 2013-14, it accounted for 1.5 per cent of total support for science, research and innovation, down from 3.2 per cent in 2007-08.

To be as fully effective as it has the potential to be, a far greater commitment is required.

The Industry Growth Centres are a new and innovative way of supporting industry in Australia and focussing investment, for the first time, on strategic priorities.

However, the current level of investment, at around $3.5 million per annum each, together with the requirement that they be self-sustaining after four years, does cast some doubt on their capacity for realising the “transformative” aspiration that underpins them.

Compare these to the UK’s Catapult Centres. These bring universities and business together to drive the UK’s innovation capability and future economic growth.

Each Centre receives between AUD$20 and $30 million per year to progress a tightly focussed effort in building world-leading, technology-based industries.

While the Catapult Centres have elements of both CRCs and Industry Growth Centres, it is their scale, strategic focus and ambition that sets them apart.

So to conclude, it is the case that seismic economic, industrial and social change is upon us.

Successfully traversing this undulating landscape requires us to do some things differently, invest properly and agree the research and innovation goal to which we aspire.

The challenge is not insignificant.

But the existing strengths of our research and innovation system and strong university foundations, combined with the enthusiastic commitment of our political leaders, should give us the confidence to make lasting change.

We won’t get there by muddling through or by winging it.

But with thoughtful determination, focus and a preparedness to learn from our mistakes as much as from the success of others, we can build a fit for purpose research and innovation system to underpin our 21st century success.

Thank you.

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