It’s been 31 years since Bob Hawke dubbed Australia the “clever country” – but if Australia is so clever, why is it falling short on so many innovation metrics?
Critics are asking questions after Australia dropped in the latest World Intellectual Property Organisation (WIPO) rankings of the world’s most innovative countries.
Australia’s innovation score of 50.34 placed it 22nd in WIPO’s newly released Global Innovation Index 2019 (GII) report – a drop of two positions from last year’s ranking – after it was edged out by Austria and Iceland.
That score put Australia as the Asia-Pacific’s sixth most-innovative country – behind Singapore, South Korea, Hong Kong, China, and Japan.
Yet while all those countries were evaluated as being “above expectations” for their level of development, Australia and 25th ranked New Zealand joined a cluster of high-income countries that were simply judged as being in line with expectations.
Last year’s higher ranking came amidst WIPO optimism about Australia’s potential leadership in renewable energy storage, with WIPO noting “highly suitable weather conditions” and “a positively evolving regulatory environment” backed by increasing investor confidence.
Good news, bad news
This year, Australia had no such success story to fete – leaving its standout results to business-type areas such as human capital and research (ranked 10), ICT maturity (13), credit markets (5), and the sophistication of knowledge workers (11).
Australia’s science and technology output measured well, ranking 7 on the back of strong research clusters in Melbourne and Sydney.
Yet while we also ranked well in R&D expenditure – 13th – this outcome was humbled by the revelation that if Korean electronics giant Samsung were its own country, it would be ranked 19th – just ahead of Google parent company Alphabet, German car maker Volkswagen, US-based software giant Microsoft, and Chinese electronics giant Huawei.
Each of those companies spends more than half as much on R&D per year as Australia.
Austrade proudly proclaims that almost 49 per cent of Australian firms are “innovation-active” and points to high rankings around entrepreneurship.
The Department of Industry, Innovation and Science (DIIS) Australia 2030 vision, laid down by the Turnbull government nearly two years ago, is titled ‘prosperity through innovation’ and described as “a plan for Australia to thrive in the global innovation race” – but the GII figures suggest Australia is stuck on the starting blocks.
Glaring deficiencies in Australia’s innovation climate are obvious given dismal rankings in areas such as overseas financing of R&D (84); per-worker GDP growth (77); the per centage of graduates in science and engineering (76); government funding per student (69); GDP per unit of energy use (67); exports of national feature films (56), cultural and creative services (56) and creative goods (54); overall investment climate (51); and knowledge absorption (50).
Finding the blockers to innovation
These rankings suggests that industry figures were right to worry when Turnbull’s ill-fated efforts around innovation-centric government were unceremoniously dumped as a government priority during Scott Morrison’s cabinet reshuffle.
Sure, local industry has bolstered its focus on entrepreneurship in recent years, with all manner of cooperative research centres (CRCs) joining private-sector efforts such as the new ACS Innovation Hub in Melbourne.
But Australia’s Innovation Efficiency Ratio of below 0.6 – a WIPO-derived metric that was deprecated this year – ranked us 76th in previous years, putting us on par with countries like Mexico, Russia, Mali and Zambia (first-world peers generally scored above 0.8).
Australia’s persistently low rank in many key metrics hints at foundational shortcomings that must be addressed before innovation can thrive here as it does in other countries – but what are they?
Measuring innovation is tricky business, and WIPO openly acknowledges that the GII is an evolving ranking that tries to standardise measures of innovation across a broad range of endeavours, economic environments and policy landscapes.
While some countries may seize on the GII’s findings as proof that their regulatory and economic settings are decidedly pro-innovation, WIPO notes the “medium to weak” quality of innovation metrics and lack of “convincing” measures of national innovation systems.
Australia, the review notes, needs better data about non-R&D based knowledge and idea creation; the capability to implement innovation; new products and processes; startups and spinouts; stocks and flows of intangible capital; employee skills; innovation outputs and impacts; and the entrepreneurship culture.
Converting innovative thought into commercial action remains a crucial part of the cycle – and that’s an area where Australia has long struggled.
“The heart of the model that works so well in defence,” BAE Systems chief technology officer Nigel Whitehead said during a recent speech to the AFR Innovation Summit, “is a simple, wholesome model where problems are solved with the application of science engineering [and] products or services are created, which are then sold to domestic and overseas customers and the gains reinvested to create another cycle of the same model.”
“The catalyst for all of this is business ambition and having a clear understanding of the business context, and the basis for a successful business strategy.”
“Those countries that are winning in the economic race have strength and successes at all of these levels and have created the ecosystem that enables each aspect of this ... [but] it’s a whole lot harder than it sounds.”
Can the government rekindle its innovation flame?
In time-honoured government tradition, a formal review is hoped to shed some light on the problem and offer a way forward.
In May, DIIS kicked off an Innovation Metrics Review that has consulted with over 100 innovation experts and is expected to recommend improvements before year’s end.
Waiting for yet another review to conclude will, however, leave Australia’s policy settings on idle for now.
Industry figures are crossing their figures in hope that the government can rediscover its innovation mojo, perhaps by putting forward a stronger message around innovation in its response to the ACCC’s recently released Digital Platforms Inquiry.
Sunita Bose, managing director of digital-industry association DIGI, urged the government to use “an innovation test” when evaluating the ACCC report, “closely examining how they will impact Australia’s digital industry at large and Australia’s global standing as a place to invest in technology.”
“A thriving technology sector,” she wrote, “means having large and small, local and global companies all alongside each other, creating an ecosystem where the calibre of employees, business opportunities and the choice of digital services available to Australians all increase.”
