PRIME MINISTER
EMBARGOED UNTIL DELIVERY CHECK AGAINST DELIVERY
SPEECH BY THE PRIME MINISTER
OECD SCIENCE CONFERENCE
CANBERRA 11 NOVEMBER 1986
Distinguished Guests, Ladies and Gentlemen
On behalf of the Australian Government I extend a warm
welcome to all of the participants in this conference and,
in particular, to the many distinguished visitors from
overseas. Nothing could be more fitting than that the first
major OECD conference to be held in this country should be
on " Policies and Directions for Science and Research".
Australian industries, academic institutions and governments
in recent years have united on the urgency of increased and
more productive effort in science and technology research
and development. Just a few weeks ago I opened an important
conference convened by major companies and the
vice-chancellors of our universities focusing on precisely
this critical issue.
In many ways few countries are more directly and acutely
aware of the need to meet this challenge. We live, after
all, in the Asia-Pacific basin, the fastest developing
economic region in the world. On our doorstep are many of
the countries which have most impressively harnessed science
and technology in the service of economic growth and
development. If this were not sufficient incentive we have in Barry
Jones, our Minister for Science, a passionate and energetic
advocate of the importance of science and research for this
nation's future. A recognised authority in his own right on
this topic, I thank Barry for opening this conference this
morning. I I
When I referred to the broad coalition of commitment that
exists in Australia on this issue I was speaking from
personal experience. one of this Government's early acts
was to convene a conference on technology. From the very
start we have included discussion of, and action on, the
role of science and technology in our plans to revitalise
Australia's economic performance.
Clearly, we are in step with our fellow OECD members in the
significance we attach to this issue, as it was at the 1982
heads of State meeting in Versailles that science and
technology was first placed on the agenda.
I understand this conference will contribute to the proposed
OECD Ministerial level meeting of the Committee for
Scientific and Technological Policy next year. As joint
sponsor, Australia is proud to be facilitating attempts by
OECD Governments to enhance the role that science and
technology can play in encouraging economic advancement.
I would now like to take a little time outlining the role of
science and research in Australia's economy and the measures
the Government is taking to encourage greater effort in
these areas.
Australia has traditionally relied for its standard of
living on a rich endowment of natural resources. From this
base we have developed internationally competitive and
highly successful agricultural, mining and energy based
industries. importantly, the development of these
industries has relied on science and technology.
Agriculture, for example, benefited from the early
improvements in shipping transport and refrigeration
technology which gave Australia access to rapidly growing
world markets. Equally importantly the efficiency of our
agriculture relied, and still does, on a high quality
science and research base. Appropriately that base has been
provided largely in the public sector but has been closely
attuned to user requirements.
More recently the Government has moved on several fronts to
improve the resources available for rural research and
development. Technological innovation is an essential
element in maintaining and improving international
competitiveness in rural industries. Our commodity
exporters, in general, have had to be highly innovative to
remain competitive in the world markets in which they have
predominantly operated.
But this traditional reliance on commodity exports has left
us vulnerable and exposed to the recent major slump in the
international prices of primary commodities. In the face of
depressed mineral commodity markets and heavily distoring
agricultural trading practices of the EEC and the US, we
cannot expect a substantial turnaround in our terms of trade
in the near future. Australia can now starkly see the need
to restructure our economy with particular emphasis on
diversifying our export portfolio into manufacturing and
services. of course science and technology will play a
leading role in this restructuring.
At a time when manufactures and services have led the growth
in world trade Australia has not been part of that
development. As a resul * t our share in world trade has
fallen sharply, from 12th world ranking in 1973 to 23rd by
1983.
These res~ ults have forced the increasing acceptance here
that manufacturing must become more outward looking. I am
pleased to say from first hand experience that there is
increasing evidence that industry is alive to the
possibilities now open to Australia. Last week I opened an
exciting building program for a local pharmaceutical company
that is aiming to sell 80 per cent of its products on
international markets.
Plainly the most desirable new course for our manufacturers
would be the one which applies science and technology most
effectively to the production of innovative goods and
services. Proving this point is the fact that the
technology intensive products, headed by the electronics
industry, computers and scientific equipment have been the
fastest growing components of world trade in manufactures.
At present Australia devotes about one per cent of its GDP
to research and development a disappointingly low figure
compared with the leading OECD countries. Not only large
economies like the U. S. and Japan but also countries with
more comparably sized economies such as Sweden and the
Netherlands devote figures approaching around 3 per cent.
Much of our research effort is in basic research rather than
market driven research undertaken by industry. more to the
point, while the overall level of public sector investment
in research and development has been broadly comparable with
that in most OECD countries, expenditure by the private
sector compares most unfavourably, especially in
manufacturing. Averaging about 0.2 per cent of GDP it falls
way behind the figure of 0.9 per cent for leading comparable
medium sized OECD countries. Therefore it is no surprise
that our industrial products have often lacked the
competitive edge that comes from industrial research and
development. The substantial depreciation of the Australian dollar has
boosted the price competitiveness of Australian industry.
We must take advantage of this but we cannot rely on price
alone as a basis for sustained competitiveness in the longer
term. There will always be countries with cost structures which we
neither should nor could emulate. These countries will
always be able to make many products more cheaply than we
can, so our competitiveness must be bolstered by enhancing
the non-pr~ ce attributes of the goods and services we
produce.
innovation enhances competitiveness in areas such as product
quality, lower rates of defects and better product
performance. The key to the product and process development
necessary for sustainable long term competitiveness
therefore is innovation based on locally performed research
and development.
Innovation requires firms to undertake research and
development particularly applied research and product
development closely linked with opportunities in the market.
Having given you a brief and frank outline of the state of
Australian industrial R& D, I would like now to outline the
course this Government has mapped to get the best return for
our country from our wealth of human resources.
Our strategy is, put simply, to provide incentives to
increased private sector R& D activity while maintaining the
overall level and improving the effectiveness of public
sector investment in R& D.
overseas studies of innovation policy show governments can
act to complement the innovatory endeavours of technically
progressive managers in industry by creating a national
environment conducive to innovation. in the final analysis,
however, these studies show that much depends upon the
abilities of industrial managers.
Private sector R& D activity shares many of the
characteristics of private sector investment generally. R& D
expenditure tends to be undertaken by firms and industries
in response to profit opportunities. significantly in this
context the Government has first and fundamentally restored
the conditions for business profitability. By improving the
overall investment climate we have improved the demand for
innovation, including through industrial R& D.
we have also acted to provide direct incentives for
innovation. These include a 150% tax concession for
expenditure by the private sector on research and
development, a complementary R& D grants scheme, a tax
incentive for private sector venture capital investment as a
complement to financial market deregulation, changes to
government purchasing and offsets arrangements designed to
give higher priority to technology and industrial
development, and strengthening of support provided through
Austrade for high technology exporters.
The tax incentive for R& D puts the decision on what R& D is
to be conducted squarely in the hands of business. In this
way it provides for the most effective linkage between
market pull and technology push. importantly, it provides a
major incentive for the many foreign owned companies
operating in Australia to locate more of their R& D activity
here and to develop this country as a base for export
activity.
it also provides an incentive for industry to establish
closer links with public sector research particularly in the
early years as industry scales up its own research
capability. There are encouraging early signs of progress
in all these respects.
So far nearly 1700 companies have registered for the tax
incentive and report an overall increase of about 40% in
real terms in their R& D expenditure in 1985/ 86, the first
year of the scheme's operation.
In their recent report on Australia's Science and Technology
policies the OECD Examiners favoured tax based incentives
over grants as a means of stimulating R& D. At the same time
the examiners noted that tax-based schemes do little to help
small companies still struggling to become profitable.
The scheme of Grants for Industry Research and Development
( GIRD) introduced as a complement to the tax scheme is
directed at just such companies and particularly those which
can demonstirate potential improved competitiveness and
export earnings.
Another feature of the grants scheme is that it provides
specific assistance for nominated technologies of
fundamental importance to industrial competitiveness and
with a widespread impact across many sectors of industry.
Biotechnology is the first area to be identified in this
scheme. Consideration is being given to further nominations
such as new materials and microelectronics information
technology. The biotechnology scheme has established vital connections
between scientists in public sector research organisations
and companiies which can commercialise a research
achievement. A good example is the collaboration between
CSIRO's Division of Tropical Animal Science and the company
Biotechno"' ogy Australia. The project aims to develop a
vaccine against cattle tick, based on synthesis of the
tick's antigen by recombinant DNA procedures in
micro-organisms.
Overall therefore, the Government has, and is continuing to,
provide a major stimulus to private sector R& D activity. As
I have indicated there are signs already that the private
sector is responding. But we still have a way to go before
we can be sure that we have attained the levels of
innovative activity that can sustain long term
competitiveness in world markets.
As business increasingly accepts the need for innovation, it
will also become more aware of the substantial assets
available to it in public sector research and of the need to
draw on this resource to assist its own product development
work. of course this does not mean that the public sector
should become directly involved in product development. But
it does call for a wide variety of interactions between
public and private research.
In Australia we already have underway a broad review of
public sector investment in research and development. A
principal concern in this review is to ensure that the
substantial investment in public sector research contributes
to our fundamental objective of enhancing innovation and
competitiveness in industry.
Among the measures already taken as part of the review have
been the setting of new directions for the Commonwealth
Scientific and Industrial Research Organisation ( CSIRO)
our major Government research organisation. The review of
CSIRO was prompted, in part, by a growing perception that
some sections of CSIRO were paying insufficient attention to
the real needs of industry and the community. As a result
of the review we have accepted a series of recommendations
designed to change the general ethos of the organisation.
In the future, the emphasis is to be on applicationsoriented
research and the strengthening of links at all
levels between the organisation and the users of its
research results.
The largest component of public sector involvement in
research in Australia is in the higher education system.
The Government will shortly be taking decisions on future
directions in higher education research based on the ASTEC
review which is nearing completion.
The challenge facing universities is to ensure that the most
effective use is made of their funds. We have now seen a
decade in which general or recurrent funding for
universities research has remained about constant in real
terms. During this period the growth in university research
funds has come through more specialised funding schemes
which are allocated competitively.
These include the National Energy Research Development and
Demonstration Program, the Australian Biotechnology Scheme,
the Marine Sciences and Technologies Grants Scheme, the
program for promotion of excellence in research which has
led to the establishment of special research centres, and
the key centre for teaching and research.
These funds represent important supplements to the
underlying levels of funding. But institutions have been
slow to move towards more competitive internal funding
arrangements which would allocate recurrent resources more
selectively to the best and most productive researchers. In
establishing suitable mechanisms university administrators
could well look to practices in other OECD countries and to
the practices of other major research performers in
Au st rali a.
Such developments do not, to my mind, impinge upon academic
freedom. There is no basic conflict between excellence in
research and the relevance of that research to national
goals. The Government and the higher education institutions
have a common purpose in seeking the best and most effective
research from the funds which are available.
We do have encouraging evidence of closer links between
university and industry.
I have mentioned the recent inaugural forum meeting between
the chief executives of universities represented by the
Australian Vice Chancellors' Committee ( AVCC) and of
business represented by the Business Council of Australia
( BCA). Recent initiatives by the Minister for Education,
including the establishment of an industry reference group,
are designed to further facilitate this important
interaction.
An example of a program funded by the Government to promote
collaboration between industry and tertiary education
institutions is the Teaching Company Scheme. Under the
scheme a research project of industrial relevance conducted
in a firm is jointly supervised by the firm and university.
The scheme is valuable for technology transfer and in
particular for allowing industry to tap the skills of highly
specialised personnel in ways which would not otherwise have
been possible. it is expected that one hundred such
projects will be funded next year.
obviously the Government believes there is a strong case for
a level of public funding of research and development in
Australia which is at least comparable to that of the better
performing medium-sized OECD countries.
Because of the introduction of the tax concession and the
need for continuing budget restraint, it is unrealistic to
expect major additional funds to be allocated to public
sector research organisations. The challenge for publicly
funded institutions is to use the resources already
available to them in as flexible a manner as possible.
Necessarily I have dealt largely with the economic
implications of the policies and directions for science and
research. But that should not be taken as the only measure
of the esteem Australians have for-individual skills and
prestige of our scientific community. The manifest
commitment to excellence shines through in so much of the
work that is undertaken in their probing of the frontiers of
human knowledge and experience. Australians have shown the
ability to undertake research and development initiatives
equal to any in the world.
Of course there is an international as well as a domestic
dimension to our interests in science. Australia has a long
and proud tradition of international co-operation in
scientific endeavours. Australia was, to take one topical
example, a founding member of the United Nations Committee
on the Peaceful Uses of Outer Space.
Those involved in scientific research have a special
responsibility and capacity to contribute to peace and
security. In the Australian context, science and research
have a particularly important contribution to make in
enhancing our capacity for defence self-reliance and in
facilitating the conditions necessary for effective arms
control. Australia's size, small populati ' on and physical environment
create special challenges and opportunities for defence
science and research, particularly in the areas of
surveillance communications and integration of weapons
systems. These challenges are being met by Australians and
particularly by the Defence Science and Technology
Organisation ( DSTO). The indigenous development of the
technologies associated with the over-the-horizon radar,
sensor equipment, anti-submarine warfare, electronic
warfare, and command, control and communications systems
have all played an important role in addressing the
challenges posed by Australia's geographic and strategic
circumstances. Through this kind of research as well as through the
integration of weapons systems appropriate to Australia's
circumstances, science and research are making an important
contribution to the maintenance of an effective Australian
Defence Force and thereby enhancing our national security as
well as the prospects for peace and stability in our region.
Scientific research can also actively promote peace through
its contribution to effective arms control and disarmament
measures. Two cases have particular relevance to Australia.
Seismological monitoring is important in the detection of
nuclear explosions and a major component of a verification
system for any comprehensive nuclear test ban, which
Australia is actively promoting, will be an adequate
seismographic network. With the opening of the Australian
Seismographic Centre in Canberra in September this year,
Australia is uniquely placed to make an important
contribution in this area.
Scientific research expertise can also contribute to
international efforts aimed at eliminating chemical and
biological weapons. Through our diplomatic activity and the
expertise of the DSTO, Australia has been a leader in this
area and has contributed to United Nations initiatives to
control and eliminate such weapons.
These examples serve to illustrate a more fundamental point.
It is a tragedy that man devotes immeasurably more resources
to scientific research for his own destruction than to work
directed to the betterment of the human condition.
As the world anxiously watches the current efforts of the
superpowers to move towards arms control agreements, we may
reflect on the appalling waste of money and ingenuity which
has gone into the build-up of their nuclear arsenals.
A conference such as this provides a rare opportunity for
men and women of the scientific community to search for
opportunities to reduce this shocking imbalance for the
benefit of all mankind.
9.
Many of these issues I have mentioned are on the agenda for
your conference. This suggests that OECD governments are
confronting common problems as they attempt to develop
policies and directions for science and research. We
welcome the opportunity to benefit from the combined
experience of the distinguished delegates gathered here from
many OECD countries.
I wish you well in your deliberations.
Thank you.