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How Can Science, Technology, Innovation, and Industry Policies Be Integrated for Economic Growth?

Updated: Apr 4

6 Sep 2022

Management textbooks and business self-help books tell us that strategy drives structure which in turns drives funding and resource allocation decisions.

Yet in public administration and public policy it seems to go the other way: first decide on some money to address a problem or opportunity, then set up a structure to find a way of spending it and lastly, rationalise this into a strategy, and then print it in a four-page glossy brochure—only for it to disappear from public view and internal attention after a ministerial launch.

Over the past 25 years the Commonwealth and the States/Territories have released literally hundreds of seemingly unconnected science, technology, research, innovation, and industry strategies — with very limited impact. We should be able to do better than this.

The June 2022 Australian Government Administrative Arrangements Order industry minister Ed Husic) complete coverage of “science and technology policy”.

This has been recognised among commentators as a good thing. Research and industry policy responsibilities, however, are distributed much more widely among several other Ministers and departments.

Education Minister (Jason Clare) has responsibility for the “co-ordination of research policy in relation to universities”, with a raft of other ministers responsible for research in Agriculture, Climate Change, Energy, Environment and Water, Defence, and Health, Aged Care and even Finance, Infrastructure and Treasury also have research roles in the context of their specific policy responsibilities.

Each year the Department of Industry Science and Technology publishes the Australian government’s Science, Research and Innovation Budget Tables which provide details of “Australian Government investments in R&D and innovation, and of Science, Research and Innovation (SRI) related Australian Government organisations”.

The SRI Tables first surfaced in 1980 as the Science Statement, and from 1989 as the Science and Technology Budget Statement. In 2001 it reverted to Science and Innovation Budget Tables and in May 2010 the Science, Research, and Innovation Budget Tables.

The SRI Tables are not a strategy document in any policy or budgetary sense. They are simply an aggregation and historical record of numerous and quite often separately determined policy and expenditure decisions made across portfolios. Nonetheless, the tables assist in pointing to the scope and direction of these uncoordinated SRI decisions.

Moreover, in recent discussions there is an implied connection between science, research, and innovation policy and industry policy. Terms are often used interchangeably, but they are not one and the same.

Can we go further with this important SRI resource in developing an Integrated Science and Technology, Research, and Innovation Policy that links to a robust industry policy.

In 2021-22 the R&D component of SRI Tables totalled $11.8 billion, with a further $0.7 billion in programmes designed to support innovation, but do not include R&D activities such as the Entrepreneurs Program, the Growth Centres Program and AI and Digital Capability Centres.

The SRI Tables identify 167 separate expenditure items, down from 182 in 2020-21. Nonetheless it could provide a foundation for developing an Australian SRI Strategy and Budget.

The recently authorised five-year United States Chips and Science Act provides 240 separate authorisations over 1034 pages totalling $US248 billion ($AU360 billion).

Despite the obvious differences in scale and scope, the Chips and Science Act has a marked similarity with the Australian SRI Tables: firstly, it is an “upwards” culmination and aggregated result of two years of Congressional negotiations and bargaining, and secondly, it covers multiple agencies and organisations.

The critical difference is that it is forward looking with a five-year appropriation horizon. But, there is also a very striking dissimilarity.

The Chips and Science Act makes specific reference to an as yet undelivered national science and technology strategy.

So, what could an Australian National Science and Technology Strategy, or a Science, Research, and Innovation Policy look like? A second question concerns how a SRI policy would connect to a national industrial policy.

Australia has developed a list of nine “national research priorities” covering food, soil and water, transport, cybersecurity, energy, resources, advanced manufacturing, environmental change, health. These areas are important for Australia’s future. However, the descriptors are non-challenging and read more like “business as usual”.

In the 2021-22 SRI Tables, mentions of research priorities is very thin among the 167 programmes. There was one identified program in cybersecurity, three in energy, three in food, 18 in health, one in resources, five in soil and water, three in transport and 26 in multiple priorities.

The government is currently updating a 2021 list of “Critical Technologies in the National Interest”. It features 63 technologies across seven categories: Advanced materials and manufacturing; AI, computing and communications; Biotechnology, gene technology and vaccines; Energy and environment; Quantum; sensing, timing and navigation; and Transportation, robotics and space.

The government is also investing $1 billion in critical technologies as part of the National Reconstruction Fund, “to build our strategic capability and power the economic growth we need to create jobs”. But with 63, and possibly more, critical technologies, some investment prioritisation and transparent allocation model will be required.

There is a connection between the research priorities and the critical technologies, but these should be articulated. But more importantly a link between critical technologies and priorities in industry policy would need to be established. Those priorities should reflect, as in the US Chips and Science Act, industries in which the nation must have adequate capabilities to be secure.

In January this year the influential US Information Technology & Innovation Foundation suggested in the world of current practical politics “no advanced nation can afford not to have a strategic industry policy—unless it wants to put its national and economic security in the hands of foreign powers”.

For Australia, strategic industries are those where we must retain and develop capabilities for our national and economic security. These might be defined as national defence, aerospace, biopharmaceuticals, quantum computing, advanced manufacturing, energy, and agriculture.

These industries are ones where Australia holds a very substantial lead in applicable knowledge, research quality, capacity and capability.

It is important not to overlook higher education as a strategic industry. In the terminology of industry economics, in 2020 higher education had an asset base of $62 billion, generated an income of $35 billion, spent $12 billion on research and $22 billion on teaching, and employed 130,000 FT and FTE staff. It “produced” 383,269 graduates and 112,631 research documents.

Higher education is also Australia’s fourth largest export, generating an estimated export income of $31.5 billion (down from $40.3 billion in 2019). Disappearance of this industry would have significant economic and security implications for Australia. International education also delivers substantial socio-cultural, skills and new enterprise outcomes.

But more than this, higher education has a strategic role in attracting new knowledge resources from elsewhere and adapting it for application in their own localised research, teaching, and engagement roles. The international flow of academic appointments and research scholars is important in this regard.

Moreover, universities are public spaces for ongoing conversations with industry and government about the future direction of technologies, markets, and industry development.

Policy responses for strategic industries require sector specific and targeted policies, including tax incentives, direct industry funding, trade provisions, regulatory provisions, R&D workforce development, public venture capital, and support for innovation precincts, districts, and hubs which provide incubator and commercialisation support for research and technology-based startups.

Strategic industry policies are additional to more generalised industry policy goals oriented towards efficiency and productivity, competition, a supportive business climate, and correcting market failures.

A new targeted approach to science, research and innovation policy that addresses economic and national strategically important industry outcomes is required.

The approach must define a policy framework first — a framework that will drive strategy development, establish the organisation structures for implementation and delivery, facilitate resource allocation decision-making, and provide processes for performance monitoring and review, and accountability.

In terms of possible structure, it is relevant to note that overarching policy coordination agencies do not have a good track record in the Australian Westminster based governance system. As has been brought to our attention recently, ministers are responsible and accountable for the execution of their responsibilities defined under the Administrative Arrangements Order and the specific Acts of Parliament they have been assigned to administer.

Accordingly, a policy framework must be defined at the Cabinet level with a sub-committee of all ministers with science, technology, research and innovation roles.

It is possible to conceive of a Cabinet standing committee of officers who would assist in the development of the strategy and oversight implementation through their respective portfolios. It could be serviced through a full-time secretariat, as an Office within the Prime Minister’s Department. This device has been used previously such as with the Office for Women, and an earlier Office of Aged Care.

Structure is a difficult call and there is much experience to draw on from numerous previous initiatives in Australian public administration — going back to the 1972 creation of the Department of Urban and Regional Development which endeavoured to coordinate and influence all Commonwealth Departmental capital expenditures in cities and regions.

It didn’t work principally because ministers didn’t like another minister encroaching on their responsibilities, and their departments did everything to undermine it.

Another response might be a new agency with its own resources to seed and stimulate new initiatives. There is the important model of the Cooperative Research Centres Committee and the former Education Investment Fund Committee.

But these are delivery models, with policy firmly in the hands of either the Minister for Education, or the Minister for Industry—but never both. At the end of the spectrum new agencies can make the system even more complex and risk becoming honeypots.

Originally published in @AuManufacturing, 6 Sep 2022

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