Our colleagues at Glasshouse Advisory summarise last night's budget which contains inexplicable cuts to the R&D Tax Incentive program, which combined with other key Budget measures will have a negative impact on Australia's innovation ecosystem.

However, there is a sleeper issue hidden in the Budget papers that provides insight into the reasons why this has happened. In the Budget papers, it is noted that 'the Government will provide $1 million over two years to support a review of existing domestic and international measures of innovation, which will inform the development of new metrics that will ensure innovation is accurately measured in Australia, to guide evidence based policy and better target investments in innovation as a driver of economic growth.'

What this tells us is that the Government doesn't currently have the evidence it needs regarding measures that drive innovation informing its policies on innovation. What we are left with is a piecemeal approach that doesn't deliver on any stated policy objective, but does deliver savings to the Budget through cuts to the R&D Tax Incentive.

Over the past 6 years, the Federal Government has changed its R&D Tax program three times (including last night's Budget announcement) and has commissioned three significant reports into the Australian innovation system (including the recently announced review of innovation measures). Yet despite this, the Government is still unable to develop and deliver a cohesive innovation policy, instead defaulting to cuts to programs that support innovation.

This budget is no different. And the review of domestic and international measures provided for in this budget is only going to add even more complexity to what is quickly becoming a very complex area.

This is a disappointing Budget, because it has introduced more uncertainty in an already unpredictable and uncertain area of Australia's economy.

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