The National Innovation Review was released this week, attacking Howard governments of the past 12 years for stymieing innovation through reduced R&D and public education spending. The review itself took flak from the Australian Computer Society, frustrated at the lack of acknowledgement of ICT as a foundation for innovation in the recommendations.

The Review, conducted by a panel of academic and business experts headed by Dr Terry Cutler, examined Australia’s stagnant innovation system and offered a series of recommendations to revitalise it. The review concluded that while Australia’s global competitors have been increasing their innovation efforts, our performance has declined.

Primarily, the panel urged the government to restore Commonwealth funding for science and innovation to the level it achieved in 1993-94 when it was 0.75 percent of GDP. In 2007-08 it was 0.55 percent, or $2.2 billion per annum behind.

The Minister for Innovation, Industry, Science and Research, Senator Kim Carr, said according to the ABS, two-thirds of Australian firms do not spend any money on R&D or innovation.

“Our job is to change that attitude. That's why I say there needs to develop in this country a culture of innovation. We need to fundamentally change the attitude toward research and development…so that people understand that you do not survive in this business without investing in your future,” Carr said at a press conference for the release of the review.

Education was high on the review’s agenda, as Carr laid the blame for Australia falling behind the rest of the world on a decade of government neglect. He said that under 12 years of Howard governments, Australia was the only OECD country to reduce public funding for higher education.

By 2003, Australian public expenditure on education had dropped to 4.7 percent of GDP, below the OECD average of 5 percent, while business investment in R&D also fell for the first time.

“Essentially, what's occurred in this country - what the review panel draws to our attention - is that as a consequence of the failure of the previous Government to actually keep pace with developments by our competitors, we are now falling further and further behind,” Carr said.

The review also addressed climate change as a key national innovation priority; taxation incentives for business R&D; meeting the full cost of university research; and unlocking publicly funded information and research through creative commons licensing and making that information available online.

According to Dr Cutler, the recommendations on R&D taxation would introduce a bias back towards small business and provide a bias towards companies in tax loss who previously were not able to claim any benefit 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,” Cutler said.