Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Hansard source

We have just heard from Senator Macdonald from Queensland, who gave us a dissertation on the American President being a lame duck; he attacked the Chinese and he attacked the Americans. Of course, he failed to point out his particular expertise in these matters, because if ever there were a lame duck, it is Senator Macdonald, with 5½ years yet to serve and of course having been dumped by his own party. He is a senator that really has no influence whatsoever within this government. He made the point about the question of the government's integrity, when we know that, in relation to betrayal, Mr Abbott has a gold medal standard when it comes to the question of him saying one thing before an election and another thing after an election. Who could be no greater expert on that than Senator Macdonald himself? His bitterness and hostility towards his government, not to mention towards every other section of this parliament, is predicated on his betrayal by Mr Abbott, and the fact that he is not on the front bench highlights that. He said that promises were easy to make and hard to keep. He knows only too well what the promises were within the Liberal Party which have seen him end up in this parlous position of being a lame duck senator for 5½ years, for the remaining period of this term.

I would like to suggest that his commitment to R&D is very limited, because this is a government bill that gives effect to one of those acts of betrayal, where the government seeks to remove $620 million of R&D support from Australian industries. We know that in advanced industrial economies innovation is the chief driver of increases in productivity, that firms that innovate are more competitive and more able to sustain high-skilled, high-paid jobs. According to the Australian innovation system report, innovation almost doubles the likelihood of productivity growth in Australian businesses, that firms that innovate are 78 per cent more likely to report increases in productivity over the previous year and that firms that collaborate with research organisations and universities are almost 2½ times more likely to report increases in productivity. So, without a strong innovation system, Australia cannot build the diversity in its economy that we so desperately need to ensure the continued prosperity of this nation. Without a diverse economic base, future growth will be unreliable and there will be much higher levels of fluctuation, with booms and declines, particularly as we are so heavily dependent on commodity exports. In Australia, overall levels of business and research collaboration compare badly with those of other OECD countries.

The tax incentive that the government offers is one of the most effective means of encouraging firms to invest in innovation. In the 1980s Labor introduced the R&D tax concession, making Australia one of the first countries in the world to seek to foster innovation through the development of taxation support, through measures such as what is at the core of this particular bill. Another progressive Labor government updated the scheme. I am very proud that, in 2011, the government changed the R&D tax concession to a tax incentive, converting the concession to a credit. We doubled the benefit for smaller firms and raised it by a third for larger firms. These are all measures that were undertaken when I was the minister. The R&D tax incentive was a landmark reform and built on a great Labor legacy of investing in innovation and R&D. The effect was immediate. The sums invested by businesses have grown by 20 per cent and the number of registrations has increased by 16 per cent since the program started.

Now, a little less than two years since the scheme has been in place, the Abbott government has proposed through this legislation a major overhaul of the R&D tax incentive. First, the entire scheme is the subject of two reviews as part of the legislative requirement and through Mr Hockey's taxation white paper. These are in addition to the measures taken through the Commission of Audit—which has sought to call an independent review—which would stretch the imagination by anyone's standards, even by the somewhat rough and ready standards of this government.

To add insult to injury, in April this year the government continued to clamp down on independent expert advice by disbanding the R&D Tax Incentive Advisory Committee. I understand the minister recently went along to the Innovation Australia board and proposed its abolition as well, only to be told by the board itself: 'But, Minister, this is a board established in legislation. You cannot get rid of this particular board without a deliberative decision by the parliament.' But this is not a matter that the government would be concerned about. When the minister goes to a board and proposes its abolition, when it was covered by legislation and he did not appear to know that, that suggests that the advice he has been getting is somewhat poor. I say it fits within a pattern, because this bill reflects that pattern of poor advice. What you expect? The R&D Tax Incentive Advisory Committee, which was established to monitor the implementation of the scheme at the request of stakeholders, has been abolished. The government is relying upon Treasury to provide it with advice and Treasury has not been able to provide substantive advice on this matter for the better part of the whole period that it has been in place.

The group of industry experts on the R&D Tax Incentive Advisory Committee demonstrates that the government is not too comfortable when it comes to the issue of genuine industrial consultation and independent advice. The government's decision to take $620 million from the scheme in the 2014-15 budget established just how astounding the government is when it comes to making sure there is a huge gap between theory and practice. The unending cycles of review and changes to the system make it very difficult for any company that is interested in investing in its own future to rely on this government's own advice. It undermines business confidence and it becomes a disincentive to investment in R&D. It brings me particularly to the example of the duplicity of this government through this matter, which Senator Macdonald sought to lay at the feet of the previous government.

What Labor did was introduce a $1 billion plan for Australian jobs, a package of measures designed to encourage innovation and stimulate investment. To fund it, there was a proposal to provide some savings out of the R&D tax incentives—to transfer moneys across to ensure that there was investment to enable us to ensure that we were able to provide the incentives to build jobs into the future. What this government has done is strip away that program and undertake to actually cut the jobs plan

The other part of the measure was that we were committed to quarterly credit payments, a move strongly endorsed by the biotech sector and small business—once again, aimed at building the innovative capacity of the country. What does this government do? It takes away those measures that help, especially, start-up companies and smaller companies who are cash strapped and, until they get themselves up and running, are left with great exposure to the market. The shadow industry minister said the exclusion of firms earning more than $20 million was destroying confidence in the tax incentive. That was the position the Liberal Party took in opposition: that such a measure would undermine confidence in the industry. But, as Treasurer, Mr Hockey actually proposed that these reductions occur. Having said in opposition that cuts to the incentive were immensely unpredictable on taxation policy, he went ahead and proposed these reductions in such a way.

So we know that the government has in opposition said one thing and in government said another. It has undermined the basic principles of the quarterly credits minus the reinvestment programs to create jobs, and it has created an environment in which the policy rationale has had no basis other than the government's search for budget savings. The government has trashed Labor's jobs package, the innovation precincts have been fundamentally undermined and the Australian Jobs Act is now up for review.

This is a bill which demonstrates the government's retreat from industry policy—a long list of initiatives—