How Australia’s innovation dreams died in the desert of complacency

SUMMARY:

Australia’s new Prime Minister promised much for the nation’s long neglected tech community. All the fine words are as ashes scattered by the desert winds. What went wrong?

The Pinnacles. West Australia © Benshot
The Pinnacles. West Australia

“There’s never been a more exciting time to be Australian,” declared Malcolm Turnbull on becoming the country’s new Prime Minister last year.

When the ruling Liberal Party, the confusingly named Aussie equivalent to the US Republicans or Britain’s Conservatives, dumped the incumbent Tony Abbott last September, most of Australia’s business and technology community were ecstatic. At long last there was a Prime Minister who spoke their language.

Former Prime Minister Abbott, who once boasted ‘I am not a tech-head’, was typical of a generation of party apparatchiks who had done little in the way of reforming the Aussie economy since Bob Hawke had been axed by the Labor Party twenty five years earlier.

The promise of Australia’s innovation

Turnbull himself came to global prominence in the late 1980s for his role as lawyer in the Spycatcher trial that saw the Thatcher government in the UK humiliated in the Australian courts. Locally he was better known for his roles in the failed Republican movement and his successful investment in Australia’s first major Internet Service Provider, Ozemail. In the years before entering politics he had been running Goldman Sach’s Australian operations. In short, he had the chops the tech community thought would see through a sea change. One of the first things the new Prime Minister announced was that government would deliver an ‘Innovation Statement‘ redefining the country’s policies towards investment in new technologies.

What went wrong?

Today those rosy views of the new government’s innovation agenda appear quaint as the entire strategy withers away. A disastrous election campaign saw the Innovation Agenda barely mentioned and Wyatt Roy, the junior minister responsible, who was constantly referred to as a future Prime Minister by Turnbull, managing to lose his parliamentary seat.

What went wrong? A number of things – a population that doesn’t really care for much outside of property speculation, a cosseted and comfortable corporate sector along with a government that seems incapable of effectively communicating anything of substance.

Possibly the most immediate problem was the government’s focus on Silicon Valley and Israeli tech startups with the Innovation Statement’s language at best misunderstood by suburban and regional Australians outside the startup communities of inner Sydney and Melbourne. Many ordinary voters, already suspicious of a government that had shown it was untrustworthy, saw the talk of ‘exciting disruption’ as code for upsetting established industries and services.

A focus on the ‘tech bro’ angle was notable in that the only real reforms coming out of the initiative were allowances for early stage investments modelled on the UK’s SEIS and EIS tax incentives along with a partial unwinding of the previous Labor government’s draconian taxation treatment of employee option schemes.

Poor messaging 

Compounding the poor messaging was the outright hypocrisy of the Turnbull government’s alleged focus on research. His luddite predecessors steadily carved hundreds of millions of dollars out of government research over the past two decades and the previous Abbott government had been openly hostile to scientific research particularly the main Federal agency, the Commonwealth Science and Industrial Research Organisation (CSIRO).

While praising universities and the CSIRO the new Prime Minister maintained almost all of the science hostile cuts and poorly thought out education funding ‘reforms’ of his predecessor. This quote from his speech launching the initiative illustrates the contradiction.

“Our universities, our research organisations like the CSIRO, where we are today and our workforce are world-class but, Australia is falling behind when it comes to commercialising good ideas and collaborating with industry.”

Going into an early election in the middle of the year, the Turnbull government based their campaign on the mantra of ‘Jobs and Growth’. Amazingly, the Innovation Statement was barely mentioned among the slogans demonising the opposition Labor party’s leader and a scare campaign that property prices would collapse were the government to lose office.

Property addiction

On one level attempting to scare the electorate with the talk of a property crash when the nation’s is addicted to property, the 2014 Credit Suisse Global Wealth report flagged the average Aussie’s dependence upon property.

“the composition of household wealth in Australia is heavily skewed towards real assets, which averaged USD 319,700 and form 60% of gross household assets. This average level of real assets is the second highest in the world after Norway. In part, it reflects a large endowment of land and natural resources relative to population, but it is also a result of high urban real estate prices. “

However for those in the tech and business communities, many of whom had seen their companies struggle to get funding from Australian investors or banks due to the nation’s focus on property speculation, Turnbull’s cuddling a property owning toddler only confirmed the hollowness of the government’s rhetoric.

A flaccid corporate sector

While Australian households’ and banks’ property obsession is one obstacle to the country developing a tech sector, a more telling factor is Australian business’ reluctance to invest in research and development. This is underscored by the World Economic Forums’ Global Competitiveness report which last year rated the country’s business sector a lousy 27th in the world for corporate spending on R&D.

The Prime Minister flagged this in his Innovation Statement speech.

Australia consistently ranks last or second last among OECD countries for business research collaboration. Increasing collaboration between businesses, universities and the research sector is absolutely critical for our businesses to remain competitive. To commercialise an idea, a great invention, a great innovation, a great piece of research and then grow it into new sources of revenue, new jobs, new opportunities and new industries.

The WEF report was particularly scathing about Australian government’s procurement of technology giving the country a derisory global ranking of 70th in that respect. Turnbull promised things would change.

…the fourth pillar of this agenda is government leading by example in the way it invests in and uses technology. Right across the board you will see there are measures to ensure that government is digitally transformed, so that it is nimble, so that you can deal with government as easily as you can with eBay or with one of the big financial institutions. We should be able to transact with government for most of our engagement on our smartphone. Digital works, it transforms, it makes it easier for business, easier for government.

Australian business’ refusal to spend money on research and development or partnering with academics comes down to the comfortable investment climate. The Wall Street journal earlier this year described the country as being a corporate ‘treasure island’ for its fat returns to the country’s powerful commercial duopolies and cartels.

With fat returns easily achieved by robbing the punters, Australian institutional investors and the country’s largest companies don’t really have to worry about research and development or innovation beyond squeezing more profit out of their insular markets. Life is very comfortable for Australia’s executive caste, content with sweating assets.

A failure to reform

By not addressing either the comfortable corporate environment or households’ addiction to property speculation, the Turnbull government’s Innovation Agenda was little more than a poorly thought out stunt. This is something that is now largely accepted across the business, technology and startup communities.

In truth Australia really is the Lucky Country. With the nation having avoided a recession for a generation, the nation is complacent. From the boardrooms to the suburbs, there’s very little need to be excited and maybe that’s ultimately why Malcolm Turnbull’s statement was doomed to fail.

Malcolm Turnbull’s statement “it’s never been a more exciting time to be Australian” was born out of a misconception about what drives Australia. Now, with a hobbled government and a global economy that’s turning against the country’s dependence on soaring commodities and easy credit, the Prime Minister may be hoping the nation, if only for his own good, stays lucky and boring. If not then Australia will pay a very heavy price for turning its back on technology investment and innovation. 

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