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Looking at innovation to transform Australia’s manufacturing sector

We have to adjust to the new reality by investing in new technology, processes and skills. Our nation is facing a historic shift, the like of which we have not seen in two generations. We need to change the way we do business by putting innovation at the heart of every firm.

With businesses downsizing or exiting production in Australia, we need to build new businesses and develop new products. And we need to do this as a matter of urgency.

This can only be done if we invest in new technologies, new business processes and new skills for people.

We cannot pretend that the world is different from how it actually is. We are doing nobody any favours simply fighting change. We cannot be in the business of propping up obsolete factories that lack any long term future.

Nor will the government be instructing the Reserve Bank of Australia to intervene in the foreign exchange market and remove its independence on monetary policy.

But we do need to acknowledge that the historic shift will not be straightforward, nor will it be without cost.

That is the reason why the government has to provide support to affected workers and communities. That is what we did for BlueScope Steel because people cannot be left to shoulder these challenges alone.

In all of this we need to be calm, we need to be firm and we need to be clear as to what the direction is. Simply stated, our task is to transform the Australian economy firm by firm, region by region, through science and innovation.

This is not something that is going to happen overnight. But we need to take the clear-sighted decisions that will ensure the painful adjustment we are going through will ultimately leave Australia stronger and better able to look after everyone.

But as we struggle with the pain of adjustment, we should not lose sight of the positives.

The mining boom may be putting upward pressure on the exchange rate and creating challenges for other industries, but it is one of the reasons why the Australian economy is expanding and unemployment stands at 5.1 per cent of the labour force.

As I go around the country and meet with workers and businesses, I am struck by the wide range of good things that are happening.

One can only guess at the desperation of people in the United States and parts of Europe who are facing such major economic adjustment but with unemployment at 9 per cent or worse.

As countries wrestle with economic adjustment, there is a growing consensus that science and innovation is the key. This puts universities and research agencies very much at the frontline.

The Chinese have made it clear that their current model will not take economic growth to the next level. For this reason, China’s expenditure on research and development has multiplied by a factor of six in the space of a decade. In 1998, R&D expenditure was $US15.8 billion, or 0.65 per cent of gross domestic product. In 2008, it was $US120.6 billion or 1.54 per cent of GDP.

And China has now committed to reach the 2.5 per cent threshold by 2020.

India and the EU are committed to major investments in R&D, and individual countries such as Sweden, France and Germany are embarking on extremely aggressive programs.

I am proud that the Australian Government is now spending $9.4 billion on R&D and innovation, 43 per cent higher than the level of spending when we came to office. But it is not just about public spending on science and research. There has to be a dividend.

This is why we are calling on Australia’s universities and research agencies to be more responsive and to develop partnerships with industry. It is why we have redesigned the R&D Tax Concession to make it a tax credit which will provide assistance to innovating companies when they need it most.

It is why I am a great believer in the Cooperative Research Centre program and the CSIRO as important connectors linking research to industry.

But it is not enough to open up opportunities. We need to equip firms so that they can claim these opportunities and deal with the inevitable difficulties that any business has to overcome if they are to succeed.

In this regard I am particularly proud of Enterprise Connect and Commercialisation Australia, two programs which the Labor government set up to help small and medium business.

The Clean Technology Investment Program and the $10 billion Clean Energy Finance Corporation will also provide a major stimulus to a whole new range of manufacturing businesses.

The rapid rise of Australian biotechnology is a case study in what can be done. Regenerative medicine company Mesoblast has been working with the CSIRO and is a recent but by no means isolated success story. It has received strong support from the Australian stockmarket and now has a market capitalisation of $2.2 billion. Just on 12 months ago capitalisation was less than $550 million.

Such success, and the wealth that has been created, is part of the virtuous circle that is laying the groundwork for Australia’s future.

World-class science, research and innovation and the programs and infrastructure that are translating that expertise into 21st-century businesses are the basis of my optimism.

We will come out of this with a stronger economy, well-balanced and with a vibrant manufacturing sector capable of delivering quality and secure jobs for the whole community.

[Senator Kim Carr (pictured above) is Federal Minister for Innovation, Industry, Science and Research.]

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