Australian businesses should carefully consider how they can assist in implementing, funding, and monitoring the recommendations set out in the 2030 Plan.

Australia is in a A$1.6 trillion global innovation race where access to larger shares of global wealth, better jobs and market-leading products and services is at stake, according to a review conducted by Innovation and Science Australia. Released on 30 January, the Australia 2030: Prosperity through Innovation strategic plan details why Australia needs to improve its level of innovation and makes actionable recommendations to the Australian Federal Government to achieve this goal.

Why should Australia innovate now?

Australia's mining boom has largely been responsible for powering the economy through two decades of uninterrupted economic growth, enabling a diverse economy to thrive across both goods and services sectors, and allowing Australians to enjoy a high standard of living in terms of employment, education and community services.

However, rapid advancements in science and technology have heralded a new shift towards a paradigm where intellectual property is fast becoming as valuable a resource as iron ore.

While this shift has major economic and social challenges for Australia, it also presents enormous opportunities. According to McKinsey and Company, digitalisation could contribute between A$140 billion and A$250 billion to Australia's GDP over the next seven years, and increase Australia's annual GDP growth rate by up to 1.2%.

To capture this upside, and not risk losing further ground to our competitor nations, Australia needs to innovate on its key strengths.

A strategy to thrive

The 2030 Plan makes 30 recommendations to the Australian Government. At a high-level, these include:

Education (Recommendations 1-5):

Growth in jobs requiring science, technology, engineering and mathematics (STEM) skills is currently outpacing overall employment growth in Australia. To meet this demand, the Australian school system needs to prioritise the teaching of STEM subjects to students, and strengthen training for teachers and school leaders in these subjects, including by reviewing and reforming the Vocational Education and Training system.

Industry (recommendations 6-10):

The global economy is on the brink of a "fourth industrial revolution", driven by the merging of digital domains such as the internet, blockchain, and artificial intelligence with physical and biological spheres. However, Australian businesses lag their international peers from a research and development expenditure perspective. The Australian Government should foster an improved business environment including by increasing support for tax and grant programs that target national priorities such as raising the number of start-up high-growth exporting firms.

Government (Recommendations 11-18):

Australia's legal and regulatory environment must be more amenable to innovation, particularly for Small and Medium Enterprise (SME) businesses. While there has been positive progress in both the financial services domain (e.g. ASIC's regulatory sandbox for eligible fintech businesses to test services without an Australian financial services or credit licence), and the health domain (e.g. the Therapeutic Goods Administration's current focus on decreasing approval times for new medicines and devices), Australian Federal, State and Territory Governments must ensure nationally consistent regulations that anticipate technological innovation and disruptive business models are in place for all industries. In addition, governments should make greater use of procurement to stimulate innovation. The 2030 Plan recommends that 33% of government procurement contracts be awarded to SMEs by 2022.

Research and Development (Recommendations 19-26):

Incentives for collaboration and commercialisation should be increased to reduce existing barriers between the research sector and industry. From a collaboration standpoint, a collaboration premium in the Research and Development Tax Incentive program would encourage greater industry-research sector collaboration. From a commercialisation standpoint, a dedicated funding stream for translational activities would encourage greater institutional support.

Culture and Ambition (Recommendations 27-30):

Through a series of "National Missions" set by the Government that target ambitious challenges in the national interest, Australia can continue to develop a strong culture of innovation. The 2030 Plan specifies a challenge for Australia to become the healthiest country in the world by 2030. A "Genomics and Precision Medicine National Mission" will build upon Australia's strong genomic sequencing capacity, leverage our international networks to facilitate cross-border collaboration, encourage additional funding from Government, industry and philanthropic sources, and have the potential to deliver far-reaching benefits to selected patient groups. Other missions identified in the 2030 Plan include restoring the Great Barrier Reef and converting a city's entire existing gas distribution network to run on pure hydrogen.

The road to 2030

Australia has reached a critical juncture in its economic development. While Government has a key role to play in fostering the next wave of economic growth, Australian businesses should carefully consider how they can assist in implementing, funding, and monitoring the recommendations set out in the 2030 Plan. The importance of the effective functioning of Australia's innovation system, as Innovation and Science Australia Chair Bill Ferris notes, cannot be understated: "This is more than a canary chirp in our economic mineshaft: it is a clarion call for national action".

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.