With the COVID-19 coronavirus threatening worse economic damage than the global financial crisis and a recession now said to be all but certain, innovation groups have called on Australia’s government to walk back from cuts to R&D investment support.

The R&D changes, along with a pivot on innovation policy, could lay a framework for financial recovery, say advocates.

Changing government support for Australia’s R&D investment programs would be “wrong”, Australian Investment Council (AIC) chief executive Yasser El-Ansary warned in calling out the government’s planned R&D cuts floated in last year’s budget.

The changes effectively killed the efforts of former prime minister Malcolm Turnbull to position Australia as an ‘Innovation Nation’ through the creation of Industry Growth Centres in key industries.

Industries seen as potential winners included advanced manufacturing; cyber security; food and agribusiness; modern technologies and pharmaceuticals; oil, gas and energy resources; and mining equipment, technology and services.

These sectors collectively represent tens of billions in revenue and a sizeable proportion of the country’s workforce – but the Morrison government stepped away from R&D support to introduce their own funding for what treasurer Josh Frydenburg called “the industries of the future”.

With economic uncertainty now dominating in the runup to the next federal Budget, El-Ansary warned that the government should be putting all options on the table and “moving the other way” when it comes to “incentivising our SME business market to expand their investment in R&D”.

Global financial disruption “creates a unique opportunity for Australia to position itself as a stable and attractive destination for offshore investors in the period ahead,” he wrote.

“We should be sending a signal to investors all over the world that Australia is ‘open for business’, and that we will do everything possible to attract investment into our economy.”

The AIC also joined calls by community and business groups to boost Newstart, Youth Allowance and other payments “to ensure greater social equality for the most vulnerable in our communities,” he added, “and at the same time deliver an immediate boost to consumer spending at a time when the economy needs it the most.”

Tough times, tough measures

With the coronavirus crisis spiralling out of control, sharemarkets imploding and Australians still reeling from the effect of devastating bushfires, economic experts agree that supply-side stimulation will be crucial to keeping the economy’s wheels turning.

The government’s evolving stimulus package is designed to do this with a “very comprehensive and very substantial” response that authorities said would get households financial support “as fast as possible”.

Yet when it comes to longer-term strategies, El-Ansary’s call for investment in innovation reflects widespread sentiment that the government’s industry-building investments are lacking.

The government last month updated its Science, Research and Innovation (SRI) budget tables, confirming that its investment innovation remains well behind historical highs.

Just 139 industry R&D programs were funded during fiscal 2019-20, compared with 161, 165, and 181 programs in the three preceding years.

Total investment was also showing limp growth, with FY2019-20 support of $9.636b up marginally over the previous year’s $9.396b – but below the $10.265b invested during FY2017-18, which was the last year of Turnbull’s government.

Investment in other SRI activities dropped precipitously this year, down from $772.6m last year to just $488.4m this year – feeding concerns that Australia’s R&D investments have fallen well behind those of global peers.

OECD figures show Australia’s spending on R&D, as a percentage of gross domestic product (GDP), declined in recent years – putting us well behind growing economies like the United States, Sweden, South Korea, and even the OECD average.

A recent government analysis said lack of innovation in Australia’s large and small companies was creating drag on the economy, with a preponderance of “laggard firms” that haven’t increased productivity in 15 years.

With global uncertainty surging and economic malaise expected, the Australian Academy of Science (AAS), for one, has argued that increased funding to innovative companies is a critical way of reversing productivity and investment trends.

Agribusiness, for example, a submission to the Productivity Commission’s recent Rural Research and Development Corporations inquiry noted the AAS “strongly supports multidisciplinary research” and recommends the government “recognise the importance and value of agricultural science research to Australia, and of the financial contributions from levy payers and taxpayers”.

Research bodies across all manner of industry sectors have echoed the calls of the AAS and AIC for a stronger focus on R&D investment.

Research Australia, for one, used its Budget submission to push the government not to proceed with the proposed cuts – focusing instead on improving compliance to ensure that existing funding is allocated as efficiently as possible.

Just how the current confluence of crises changes the government’s attitude towards R&D funding will become clear come Budget time – but in the meantime, calls for change are likely take a back seat to the government’s focus on immediate stimulus.