14 4. 4 Proposed Future 18 IMPROVING INNOVATION SUPPORT TO SMES 4the INNO-Partnering Forum (IPF) is the outcome of a call from DG Enterprise and Industry within the PRO
Enterprise Ireland (IE), FFG (AU), NL Agency (NL), Tekes (FI), Technology Strategy Board (UK) and VINNOVA (SE.
An example of this is the pre-commercial procurement that in many countries is a new approach on demand side support
ii) how to stimulate demand of innovation, especially using procurement as a catalyst for innovation support
or innovation support services. This report shows that agencies should not focus on only providing money in early stages,
Many of these lessons/practices were identified for example in the in peer-reviewing of The irish programme for High-Potential Start-ups and the Finnish programmes for young innovative enterprises (VIGO-programme in connection with NIYPROGRAMME.
For the stimulation of demand of innovation-public organisations can play an important role as visionary risk-taking and demanding reference customers.
these organisations can stimulate innovation through innovative demand side measures, such as public procurement. An approach that has received much attention is the US SBIR programme and its successors in Europe and Asia.
Stimulation of demand is provided not only through public organisations. Demand from private organisations can also be stimulated through different governmental initiatives such as subsidies
tax redemption schemes and regulatory changes. Another important remark is that if SMES are prioritised as a target group for innovation procurement schemes,
and highly specialised and individual measures addressing hi-growth SME (e g the finnish programme Young Innovative Enterprises) on the other.
One of the lessons learned from the project so far is that the IPF needs to improve its communication, something
However to what degree some of the services are carried out by a secretariat or if some services are carried out by partners,
remains to be decided. In addition, a decision for how such a secretariat should be setup is required also.
Therefore, a future IPF could also cater to not only DG Enterprise and Industry, but also DG Research and DG Regio. 2. 1 Purpose of Synthesis report The purpose of this report is to present the results of the project
-IPF as a learning platform that facilitates collaboration and learning among organisations providing innovation support services to SMES.
-IPF as a provider of recommendations that improves the quality and effectiveness of innovation support services to SMES.
stimulate demand of innovations and improve effectiveness and efficiency of innovation support service delivery. 2. 2 Structure of this report The report is structured in the following way:
what has been identified as strengths in the good practises analysed. 2 Introduction IMPROVING INNOVATION SUPPORT TO SMES7 3. 1 Background The IPF is the outcome of a call from DG Enterprise and Industry within the PRO INNO Europe
and efficiency of public innovation support services in Europe. Furthermore, the call had the following intentions:
DG Enterprise and Industry launched a call to mobilise those innovation agencies and innovation service providers that are committed strongest to work together.
and management of innovation support services and/or cluster programmes at national and regional level with a focus on support to innovative SMES.
and prepare recommendations on how to provide innovation support services more efficiently. 2. Carry out peer reviews (mandatory) to search for better practices in providing innovation support services.
and searching for better practices in providing innovation support services to innovative SMES. 3. Setup a good practice exchange scheme between public innovation funding agencies based on a twinning concept (mandatory),
and/or better quality management instruments (mandatory) supporting public innovation funding agencies to raise the quality and effectiveness of their services.
and operations as well as the provision of services provided to SMES. 3. 2 What has been the purpose of the IPF project?
Enterprise Ireland (IE), FFG (AU), NL Agency (NL), Tekes (FI), Technology Strategy Board (UK) and VINNOVA (SE.
IPF's approach has been that of a policy incubator in the implementation of the European Innovation Plan both in terms of challenges addressed
An example of this is the pre-commercial procurement that is a new approach on demand side support in many countries.
stimulate growth (SUP1) foster internationalisation (SUP2) make SMES more attractive for private capital markets (SUP3) make innovation processes of SMES more effective (SUP4) The need to improve the efficiency and effectiveness in providing
more efficient and effective innovation support (EFF2) improve the access to public support schemes for SMES (EFF3) increase policy initiatives that stimulate the demand of innovation (EFF4) 3. 3 Common
The Service Delivery System (SDS) describes how an SME perceive the system that delivers the services to them from a bottom-up perspective.
It includes the set of services (including funding) provided by organisations together with a set of rules that an SME has to adhere to
in order to access and make use of those services. The idea behind the model is that
delivery of innovation support services to SMES. The consortium has held regular meetings, working actively in different work packages
third on the recommendations on how innovation support services can be improved in Europe within the three themes selected. 4. 1 Learning platform The learning platform developed by IPF has been based on the following approach:
and facilitate communication and networking beyond physical meetings. Some of the more important conclusions and lessons learned using this approach have been the following:
and assessing good operational practices at organisations providing innovation support services. The use of EFQM has
ii) how to stimulate demand of innovation, especially using procurement as an vehicle for innovation support
Access to capital, costly patenting, market fragmentation, outdated regulations and procedures, slow standard-setting and the failure to use public procurement strategically are all weaknesses that prevent good ideas from successfully reaching the market.
and investment barriers across Europe and to support the business driven management and utilisation of intellectual property rights in companies easier and less costly.
Incentives to attract relevant business competence to new and early stage ventures are often a prerequisite to mobilise sufficient private growth capital to the company.
-and innovation networks and clusters SMES can develop their own businesses in collaboration and competition with other firms in the cluster/network.
Improved performance of seed and early stage investments. To improve performance of seed and early-stage investment industry,
we need to simultaneously address: Investment readiness in potential innovative and growth SMES. This is an area where government initiatives are needed
since Europe does not have the capital structure of the US where private money is much larger than the Venture capital industry.
This is also linked with the framework conditions and initiatives attracting serial entrepreneurs and relevant business competences to invest their time and skills in early stage SMES.
Knowledge and technology intensive companies need investors with a deep understanding of both the business and technology opportunities and obstacles.
This understanding may be acquired through entrepreneurial and early stage investment experience and needs its own policy measures.
Stimulate and create conditions for larger seed funds Seed funds make money on follow-up investments, not on entry investment.
This requires a solid capital foundation to work from and such funds must be able to commit themselves to companies with a high growth potential.
Stimulate and create conditions for different kind of growth capital, not only equity based investment but also loans, guarantees etc. adapted to companies having predominantly intangible assets.
Demand driven support measures to stimulate the use and demand for innovations. In many cases, measures driving the markets for innovation are, even more important for the growth of the economy than stimulation of the production of innovations.
This covers e g. procurement initiatives to bring innovation into use tax incentives framework conditions to stimulate deployment and usage of innovations, etc.
Embrace a broader concept of innovation that also addresses non-technological innovation opportunities that create new business
and customer value for companies. Moreover, IPF has through its peer review exercises concluded on the following guidelines for growth support to SMES.
the main sources have been the peer reviews of The irish initiative for High-Potential Startups, the Scottish Proof of Concept programme, the Finnish VIGO-and Young Innovative Enterprise-programme and The french Venture capital
Apply systemic approaches do not focus on isolated measures or support services. Growth means internationalisation both in market reach and competitive strength.
Adequate supply of capital and competences are crucial for growth in SMES. Measures addressing information symmetries and risk assessment tools and systems are examples of government initiatives that can stimulate private initiatives.
business models, marketing and sales innovations etc.;improving the ability to run innovation processes in new ways e g. through open innovation methods and foster a new leadership, culture and management that supports excellence in innovation performance.
How to stimulate demand of innovation Public organisations can play an important role as visionary risk-taking and demanding reference customers
and stimulate innovation through innovative demand side measures, such as public procurement. There are some general lessons learned from studying SBIR-like efforts in Europe, the USA and Asia.
Furthermore, procurers should be encouraged to express need-driven challenges, rather than products or services which they are used currently to
as well as new providers of services entering the market. There should be a balance between the EU, national and regional initiatives.
and take up of the innovation procured to additional customers and markets. Experiences from Asia and US show that
in order to stimulate demand of innovation in public organisations, governments can require public agencies and organisations to identify potential innovation procurement opportunities and demands,
and allocate budgets for their procurement. Another approach is the US Challenge. gov, which stimulates public organisations to post their challenges on to a website that facilitates crowd sourcing of solutions.
To stimulate demand on innovation is broader than public procurement and can through different means also influence demand from private organisations,
e g. public agencies can facilitate innovation procurement in private organisations by e g. gathering buyer organisations to commit to buy certain offering
like the Swedish regulatory changes that allowed employers to provide their employees with cheap PCS which in turn drove demand of broadband and Internet services.
Another approach has been developed in IMPROVING INNOVATION SUPPORT TO SMES 17 South korea where subsidies for large companies to buy new innovative products/services from SMES are provided.
individual measures addressing high-growth SMES with specific and timely services. Governments can more efficiently address both high volumes
Studies of needs of SMES show that they need funding without undue delays (e g. waiting for a specific competition.
They also need timely and personalised information on funding opportunities and easy access to advice as well as tailored support.
Access to broadband services are widespread. Clients that are sophisticated more require funding and limited advice rather than handholding, in depth reviews and advice on improving performance.
IMPROVING INNOVATION SUPPORT TO SMES 18 Segmentation also offers opportunities for agencies to improve their dialogue with policy makers
and other stakeholders since it highlights the different innovation support needs of SMES in a clearer way than
An interesting example is the Enterprise One scheme run by SPRING Singapore that gathers support on a web
as it has provided opportunities for learning, both in formal and in informal ways. Findings and lessons learned have had an impact on the participating innovation agencies.
However, to what degree some of the services are carried out by a secretariat, or if some services are carried out by partners
or sub suppliers, remains to be decided. The unique aspect of the IPF is the profile, the membership and the access to leading experts.
e g. a consortium with central actors 2) See Business model Generation by Osterwalder & Pigneur (John Wiley & Sons,
ISBN 978-0470-87641-1) for a description of the business model canvas 9 (14) IMPROVING INNOVATION SUPPORT TO SMES 19 that are involved in all processes and a council with more broad based
1 Opportunities and challenges in the global economy...2 Australia has succeeded by playing to our strengths and through economic reform...
A lower cost, business friendly environment...27 Ambition 2: A more skilled labour force...45 Ambition 3:
Industry policy that fosters innovation and entrepreneurship...68 PART C: IMPLEMENTING OUR ECONOMIC ACTION STRATEGY...
Australia has experienced 23 years of economic growth. Over the last three decades the value of our exports has risen fourfold.
Exports now represent one dollar in every five of national income. However, our success should not be an excuse for complacency.
Commodity prices have fallen from their peak in 2011; the deterioration of Government finances since 2008 has made Australia a borrower rather than a lender;
Our proximity to the fastest growing region in the world not only allows access to an untold number of customers;
Improving Australia's competitiveness is a central part of the Government's Economic Action Strategy to build a strong, prosperous economy and a safe, secure Australia.
1. a lower cost, business friendly environment with less regulation, lower taxes and more competitive markets;
and 4. industry policy that fosters innovation and entrepreneurship. This Agenda is an integral step along the path of economic growth and prosperity.
I welcome the debate this paper will foster. Improving Australia's competitiveness is essential in building the stronger economy that we all want.
The Hon Tony Abbott MP Prime minister of Australia TPO00007 Industry Innovation and Competitiveness Agenda Industry Competitiveness iv Industry Innovation and Competitiveness Agenda Executive Summary
Opportunities and challenges for the Australian economy The increasing economic strength of Asia and growing integration of the global economy present great opportunities for Australia.
Asia is driving huge demand for a diverse range of goods and services. At the same time new markets are being created
and many services once only delivered locally are imported now regularly or exported, as trade barriers fall and technology improves.
To seize these opportunities, Australia will need to compete with the best in the world. Many of our competitors have recognised already these new markets and opportunities.
A number of Asian economies are climbing up the value chain, shifting from largely low skilled industries to high skill jobs
while maintaining a relatively low wage structure. Other advanced countries are aggressively reforming their economies.
They are reducing barriers to trade in goods and services reining in inefficient public spending, reducing taxes, deregulating and improving competition, stimulating entrepreneurship, investing in infrastructure and giving research a greater commercial focus.
Only through similarly ambitious reforms can Australia secure its future as a high wage economy with a strong social welfare safety net in the face of this vastly more competitive world.
Australia compares well against a number of international economic benchmarks, but in recent years our competitiveness has weakened.
Australia ranks around the average of Organisation for Economic Co-operation and Development (OECD) nations on most aspects of government policy,
and we rate well on dimensions such as macroeconomic and financial sector policies, income and wealth, jobs and earnings,
and the resulting slow recovery, benefitting both from previous economic reforms and the mining investment boom.
and we will need to find new sources of growth as the resources investment boom fades.
resulting in fewer jobs and lower economic growth. If left unaddressed, our declining competitiveness will represent the start of an unacceptable slide into mediocrity.
and equipping our economy for the challenges ahead, to prevent Australia's economy from drifting.
The Government's vision is of a nimble economy, capitalising on Australia's strengths. It includes businesses
and workers equipped with the skills and incentives to adapt to changing economic conditions and able to seize new opportunities.
Central to this vision is need the for strong and self-reliant Australian businesses: large and small;
in resources, services, manufacturing and agriculture. It is only through businesses and industries that are able to compete successfully on their own merits that the jobs
the Government understands the importance of encouraging entrepreneurship. Entrepreneurship and a flourishing start-up community promote job creation and productivity growth.
These types of businesses benefit the broader economy by testing new ideas, developing new products and implementing new business models.
Creating the conditions which encourage risk taking, entrepreneurship, investment and hard work is important to foster innovation in Australia.
Likewise, much will be required of our workforce, to provide the skills and generate the ideas needed for businesses to succeed
and for jobs and incomes to grow. We will need particularly people with a firm grounding in science, technology,
engineering or maths if Australia is to compete successfully. More generally, in an increasingly globalised economy, it will be critical that all businesses have the people
and skills to innovate, the networks to remain competitive in domestic markets, and the know-how to identify opportunities in global markets.
The Government's vision also includes a leaner and more focused model of government itself.
Government has an important role in fostering the right economic environment, so that businesses can create
or capitalise on good opportunities wherever and whenever they emerge. It also needs to address significant market gaps and deficiencies.
and set in train significant new investment in public infrastructure. We recognise that much more needs to be done.
It is also why we are instituting a number of longer-term processes looking in detail at taxation, the Federation, the financial system, competition policy, workplace relations, energy, agriculture and the development of northern Australia, among other issues,
The fundamental aim of the Government's Economic Action Strategy is to provide a competitive environment that allows businesses to create the jobs
and builds on the Government's other economic reform efforts to make the most of Australia's strengths and business opportunities.
a lower cost, business friendly environment with less regulation, lower taxes and more competitive markets;
and industry policy that fosters innovation and entrepreneurship. The specific actions the Government will undertake through the Competitiveness Agenda are summarised below and detailed in Part B of this report.
The world's major economies have committed to undertake ambitious reforms with the goal of lifting collective G20 GDP by more than 2 per cent above the current trajectory over five years.
and will focus on reforms in investment and infrastructure, trade, competition, employment and participation. As G20 president, Australia will show leadership in pursuing a new wave of economic reform.
Box 1: Key Initiatives Encourage employee share ownership (Proposal 15, page 76) Establish Industry Growth Centres (Proposal 13, page 72) Reform the vocational education and training sector (Proposal 10,
the Government is increasing public investment and encouraging greater private investment in infrastructure, and improving infrastructure project selection, funding,
financing, delivery and use. 4 INDUSTRY POLICY The Government is refocusing industry policy to drive innovation and entrepreneurship, not dependence on government handouts and protection.
and accelerate the growth prospects of our high-potential small and medium sized enterprises and most promising sectors.
and researchers on a plan to focus the Government's $9. 2 billion per year investment in research to get a better commercial return. 1the Government will make it easier and cheaper to do business by:
and improving access to international markets and opening up the economy to greater domestic and international competition.
Business Environment TPO00007 Industry Innovation and Competitiveness Agenda Industry Competitiveness Executive Summary ix Ambition 1:
A lower cost, business friendly environment The Government will make it easier and cheaper to do business by:
and improving access to international markets and opening up the economy to greater domestic and international competition.
Reducing the regulatory burden Regulation is necessary for a well-functioning economy and society, but too often the first reflex of governments has been to regulate,
Reducing the taxation burden Australian governments rely on tax revenue to fund the public investment and services on which society and the economy depend,
but this comes at a cost to individuals, businesses and the economy. The Government will work to reduce taxes,
simplify the tax system and increase certainty. Actions already taken: Repealed the Carbon Tax. Repealed the Minerals Resource Rent Tax.
improving tax settings for productivity, international competitiveness and economic growth; improving incentives to work, including through the interaction of the tax and transfer systems;
Increasing domestic and international competition The Government will further open our economy to domestic and international competition
and investment to improve access to high-quality, low-cost goods and services. This will benefit consumers
and enhance the competitiveness of businesses that rely on these goods and services as inputs. Greater competition within Australia will also provide incentives for domestic producers to innovate
and lift their productivity, while greater market access will enable exporters to achieve global scale.
Endorsed, with State and Territory Trade and Investment Ministers, five priority areas where governments will collaborate to attract
and facilitate foreign investment in Australia: agribusiness and food; major infrastructure; tourism infrastructure; resources and energy;
and advanced manufacturing, services and technologies. Appointed investment specialists to Austrade to facilitate foreign direct investment projects to support these foreign investment priorities.
Actions to come: The Government will continue to work towards concluding a free trade agreement with China that boosts trade and investment and builds upon our strong and rapidly growing economic relationship.
The Government will consult with industry to co-design a‘trusted trader'programme to streamline customs procedures,
and Territory governments to remove those remaining barriers that restrict foreign investors in professional services from forming certain types of legal entities.
The Government will respond to the recommendations in the Competition Policy Review's final report,
to increase competition and thereby drive innovation and productivity. The Review has been asked to fully consider competition policies
laws and institutions. The Government will better balance financial system efficiency with stability and consumer protection, in light of recommendations from the Financial System Inquiry.
encourages investment and supports jobs growth. The Government aims to create a world's best practice higher education
Announced expanded access to demand-driven funding from 1 january 2016 at a cost of $820. 4 million over three years,
Refocused the delivery of apprenticeship support services on improving participation and completion rates with funding of $200 million per year.
Attracting the best and brightest to meet Australia's skill needs Highly skilled migrants contribute to a strong and vibrant economy, bringing know-how, innovation and entrepreneurship and also helping to plug short-term skills gaps.
including by involving Austrade in the process of determining eligible complying investments; aligning qualifying investments with Australia's five investment priorities (outlined in Ambition 1;
and introducing a premium stream for people investing more than $15 million. Returning the workplace relations system to the sensible centre The workplace relations system has an important role in ensuring workers'rights,
and seize new opportunities and workers must be free to negotiate working arrangements that suit their personal ambitions and circumstances.
and require productivity improvements to be discussed in enterprise agreement negotiations. The Government will task the Productivity Commission to review Australia's workplace relations framework,
the Government is committed to increasing public investment and encouraging greater private investment in infrastructure, and improving infrastructure project selection, funding, financing and delivery.
Greater public and private investment in economic infrastructure Actions already taken: Increased total Commonwealth investment in transport infrastructure to $50 billion through to 2019-20.
Provided, as part of this investment, $11. 6 billion to establish an Infrastructure Growth Package, which should reduce congestion
and improve market access for goods and labour. This includes: $5 billion over five years toward the Asset Recycling Initiative,
and recycle the sale proceeds into new productivity-enhancing infrastructure this will leverage close to $40 billion of new infrastructure investments;
and measures to expedite infrastructure investments, including work on major projects such as Melbourne's East West Link Western Section (stage 2), Adelaide's North South Corridor, the Perth Freight Link, the Toowoomba Second Range Crossing,
Appointed a Senior Investment Specialist to Austrade to facilitate foreign investment in Australian infrastructure. TPO00007 Industry Innovation and Competitiveness Agenda Industry Competitiveness xviii Industry Innovation and Competitiveness Agenda Recalibrated the National Broadband Network to use the most cost effective technology
Established a ministerial working group to identify priorities for fast-tracking investment in water infrastructure. Actions to come:
The Government will use the 15-year infrastructure plan commissioned from Infrastructure Australia to inform future infrastructure investment.
INDUSTRY POLICY THAT FOSTERS INNOV ATION AND ENTREPRENEURS HIP The Government is refocusing industry policy to drive innovation and entrepreneurship,
and accelerate the growth prospects of our high-potential small and medium sized enterprises and most promising sectors.
This will streamline the delivery of business services through www. business. gov. au and a single call centre.
Assisted business to benefit from international growth opportunities by: delivering a‘Team Australia'approach to support trade and investment through leadership of trade missions by the Prime minister and senior Cabinet ministers to priority markets;
returning $200 million in capital to the Export Finance and Insurance Corporation to help small and medium enterprises increase exports;
and boosting Export Market Development Grants by $50 million. Established the $50 million Manufacturing Transition Programme to assist Australian manufacturers to transition to higher value activities
and market connections for groups of small and medium enterprises seeking to enter global value chains.
and researchers on a plan to focus the Government's $9. 2 billion per year investment in research to get a better commercial return,
to encourage greater entrepreneurship and so that good ideas can be commercialised in Australia. The Government will consult with industry on the appropriate regulatory approach for start-ups that seek to access crowd-sourced equity funding.
and Competitiveness Agenda Industry Competitiveness 2 Industry Innovation and Competitiveness Agenda The Case for Reform Australia has enjoyed 23 years of uninterrupted economic growth, in large part due to the economic
Declines in the prices of our exports have wiped around $40 billion from national income per year since the commodity price peak in 2011,
and further reductions are expected (ABS, 2014b). Australia's public finances have deteriorated markedly since the global financial crisis,
but Australia also faces an increasingly competitive and uncertain international environment. While the opportunities are great,
the changes taking place in the international economy also present further challenges to our living standards.
Only by reforming and grasping the opportunities which the world affords us can we assure our living standards in the decades ahead.
Opportunities and challenges in the global economy The economic strength of Asia is changing the world.
Economies like China, India, Indonesia, Vietnam, Malaysia and the Philippines have grown dramatically over the past 30 years
and this is projected to continue (Au-Yeung et al, 2013). ) While similar to the experience of earlier movers like Japan and South korea, the scale of the current rise is unprecedented.
By 2025, China will be the largest economy in the world and the GDP of emerging Asia1 will be around US$51 trillion (Chart 1), 2 approximately five times all the already-developed Asian economies combined (Au-Yeung et al, 2013).
Emerging Asia represented around 9 per cent of the global economy in 1985. By 2025 it will be around 40 per cent (Au-Yeung et al,
2013). 1 Emerging Asia includes: China, India, Indonesia, Malaysia, the Philippines, Thailand and Vietnam. 2 Purchasing power parity in 2011 dollars.
TPO00007 Industry Innovation and Competitiveness Agenda Industry Competitiveness THE CASE FOR REFORM 3 The expansion and enrichment of Asia's middle class is increasing demand for all manner of goods and services
More generally, China's share of global demand for luxury goods is projected to double to around 20 per cent by 2020 (CLSA, 2011.
Meanwhile, many Asian economies are becoming major new suppliers of these same goods and services, bringing serious competition to the global stage (Chart 2). To date,
this has occurred mainly in less skill-intensive goods and services. Emerging Asia has increased its share of global manufacturing output from around 6 per cent in 1982 to 29 per cent in 2012
and its share of services exports has grown from 6 per cent in 2003 to 11 per cent last year (United nations, 2013;
) As Asian economies invest in education, skill up (Chart 3) and move up the value chain,
they are producing more advanced goods and services. In 2000, China produced around 6 per cent of the world's communication equipment;
This growth is taking place against a backdrop of a global economy that is becoming increasingly integrated.
Advances in technology have made communication and transportation faster 010 20 30 40 50 60 0 10 20 30 40 50 601985 1995 2005
and business activity while also creating new opportunities. Falling transport costs are facilitating the movement of people and goods. For example,
Improvements in communication technology have made also it possible to share information and bring specialist skills to bear at a distance,
allowing services to be traded internationally where once these were available only locally (Elms & Low, 2013).
For example, improved telecommunications has created a new market for remote medical and telehealth services, such as the delivery of clinical services through videoconferencing and remote monitoring of health conditions.
Advances in technology have made also it possible to coordinate complex production processes across borders (Elms & Low, 2013.
The global economy is also becoming more integrated as governments negotiate free trade agreements and unilaterally reduce trade and investment barriers.
Effective tariffs in OECD economies have halved in the past 30 years, falling from around 4 per cent in 1988 to below 2 per cent today (World bank,
2014b). ) Effective tariffs in developing countries in East asia and the Pacific have fallen more markedly, from around 14 per cent in 1995 to around 4 per cent today (World bank, 2014b.
Barriers to foreign investment and skilled labour have also been reduced, allowing these to move to where the commercial returns
TPO00007 Industry Innovation and Competitiveness Agenda Industry Competitiveness THE CASE FOR REFORM 5 The changing global economic landscape presents Australian businesses with some great opportunities.
Australian businesses will also have increasing opportunities to sell to more distant markets, participate in global value chains and access imported business inputs, skilled labour and investor capital.
Large businesses will have more opportunities to scale up for a world market and small businesses will be able to find niche markets for their products overseas.
This means Australia will need to compete hard for sales of goods and services exports, for skilled labour, for investor capital and for a place in the world's global value chains.
This will require a flexible economy that can absorb declines in some sectors and quickly expand into others as opportunities emerge.
Producing a niche input to be part of global supply chains Ferra, a Brisbane-based company, specialises in the design, manufacture, assembly,
Its customers include Lockheed martin Airbus, Boeing, BAE Systems, GE Aviation and Thales. Ferra has signed recently a number of long-term agreements to supply JDAM ER Wing Kits, P-8, CH-47
of uninterrupted economic growth we have seldom been outside the top dozen countries globally in per capita GDP (The Conference Board, 2014.
exports are now worth one dollar in every five of national income (Chart 4). Foreign investment in Australia has increased fivefold over the past 25 years,
and there has also been strong growth in Australian investment overseas (Chart 5). Access to international capital, skilled workers,
and goods and services, has been critical to the growth and development of Australia's economy.
Many of the massive scale projects that have underpinned the resources investment boom, like the US$18. 5 billion Gladstone Liquefied Natural gas (LNG) project in Queensland, have depended on international capital, expertise and materials (Santos,
2014). ) Imports and the inflow of foreign investment and skilled migrants have not only helped to physically build our economy,
they have brought also new technology and human know-how; better, cheaper and more varied goods and services;
and increased our international people-to-people connectedness. This has improved the operation and products of our exporters and domestically focused businesses alike.
Australia's success in harnessing global opportunities has in part been due to our great national strengths.
our education system was ranked in the global top 15 in 2014 (Economist Intelligence Unit, 2014). We speak the language of business English
Australia's success also stems from our proud history of making the hard decisions to reform our economy.
In the early 1970s, the Australian economy was volatile, insular and inflexible. Today, thanks to the hard won reforms of the decades that followed,
Australia's economy is more stable, open and flexible. Australia floated the dollar, introduced independent monetary policy,
Former governments increased competition through the National Competition Policy, privatised public assets like Telstra and the Commonwealth Bank,
and personal tax rates and introducing the Goods and Services Tax. These reforms enabled Australia to seize opportunities as they arose.
The triumph of Australia's resources sector is a testament to the benefits of the economic reforms of the past.
In the decade to 2012-13, non-rural commodity prices rose around 120 per cent,
resources investment surged from $18 billion to $113 billion, the resources sector workforce trebled to over 260,000 people
This expansion created stresses within the economy, particularly in trade-exposed sectors, through its effects on domestic costs and the exchange rate.
1994 2004 2014 A$billion (2011-12) Foreign investment in Australia Australian investment overseas Chart 5:
Overseas investment Note: Deflated by Consumer price index Data Sources: ABS, 2014d; ABS, 2014e. -10-5 0510 15 20 25 30 35-10-505 10 15 20 25 30 35-3-2-1 0
Terms of trade booms and inflation Data Sources: ABS, 2014c; RBA, 2014b; RBA, 2014c. TPO00007 Industry Innovation and Competitiveness Agenda Industry Competitiveness 8 Industry Innovation and Competitiveness Agenda of the business services, construction,
and manufacturing sectors shifted to take advantage of the resources boom, so now the resources and resource-related sectors comprise around 18 per cent of total economic activity (Rayner & Bishop, 2013).
This expansion could not have occurred as successfully without the economic reforms that gave Australia the necessary flexibility to relocate capital
and labour, including from offshore, into the resources sector. Economic reforms of the past allowed the economy to smoothly absorb the resources boom.
The combination of a floating exchange rate, flexible capital and product markets and independent monetary policy stopped the economy from overheating.
This contrasts sharply with the last terms of trade boom in the 1970s. Although only around one third of the size, the 1970s boom was associated with a surge in inflation
interest rates and nominal wages (Chart 6). There were other factors at play such as the world oil shock,
but the economy's inflexibility exacerbated an already difficult situation. Many industries have bright prospects With the resources investment boom now fading,
Australia will need to look to new sources of growth and jobs in coming years. The future is inherently uncertain,
but Australia's strengths today and the trends in global demand and supply provide a window to where some of the jobs and industries of the future may lie.
A number of private sector economists have identified industry sub sectors with growth potential. While the growth estimates differ in the details
Although the services sector is overlooked often, the sector will be a particularly important source of jobs in the future.
Services have grown already to be the mainstay of the economy, contributing over 70 per cent of output
the services sector includes several high wage and high skill industries ranging from accounting, engineering and programming to surveying,
Further growth in services is expected to meet future domestic demand, especially in smaller sectors that show potential like health and aged care services.
Australian services exports also make an important contribution to Australia's economy. Australia exported around $58 billion worth of services in 2013-14,
accounting for around 17 per cent of total exports and 4 per cent of GDP.
The main services exports are education and tourism with a variety of business service exports also significant and growing strongly (ABS, 2014d;
Some future growth sectors Deloitte (a) Pwc (b) IBIS World (c) Outlook Economics (d) Mckinsey (e) Gas Food & beverage processing Pharmaceuticals, biotech & medical
Agriculture International education Tourism Mining services Professional & financial services Distribution services (a) Deloitte (2014), Positioning for prosperity:
and Built environment & construction as having strong growth paths. c) IBIS World (2013), Australia's Top 5 New Exports.
Within the professional and financial services category IBIS identified legal services as a key growth subsector.
d) Outlook Economics (2014, unpublished), AUS-M. Distribution services includes wholesale and retail trade, transport,
and is now Australia's largest services export market, accounting for around 13 per cent of total services exports in 2012-13 (Department of Foreign affairs and Trade, 2014;
Treasury, 2006. Further growth in services exports can be expected. Of course, many sectors of the future cannot be predicted today.
(or the accompanying changes and disruptions to existing business models brought by the internet). Nor could many have confidently foretold the extent of China's spectacular recent growth and its soaring demand for minerals and energy.
Further economic change and disruption can be expected, but its exact effects on business opportunities and the profitability of different sectors cannot be predicted.
Not all areas of apparent strength and good prospects today will necessarily remain so in the future.
TPO00007 Industry Innovation and Competitiveness Agenda Industry Competitiveness 10 Industry Innovation and Competitiveness Agenda This highlights the need for a nimble economy
and to seize new opportunities wherever and whenever they emerge. While much will be expected of our largest and most successful companies,
They are at the heart of the creativity that our economy will need in the future. Much will also be required of our workforce,
engineering or maths if we are to compete in several emerging fields. More generally, in an increasingly changing, globalised economy, it will be critical that all businesses,
small and large, have the people and skills to innovate, the networks to remain competitive in domestic markets,
and the know-how to identify opportunities in global markets. Using technology to improve services Autumncare is based a Perth company that applies technology innovatively to improve the management of aged care.
The company's electronic systems have based modernised paper systems, allowing care and clinical staff to monitor
As the population ages there will be more opportunities for innovative approaches to aged care. With a solid Australian customer base, Autumncare has plans in train to take its innovative solutions to the international market.
World demand for gas is expected to increase by around 50 per cent by 2035, largely led by Asia (BREE, 2013).
2014). 2. Mining services continues to expand F i r m s t h at p ro v i d e equipment,
technology and services to the resources industry account for $15 billion of exports each year (Austmine, 2013).
Continued growth is expected as ongoing urbanisation in Asia will require greater investment in infrastructure and so demand will increase for our resources.
As the depth of ore deposits increases and the grade of ore decreases, the demand for mining technology and services will continue to increase.
Our mining advantage is not just about resources in the ground Groundprobe is a Queensland company with its origins in university research.
TPO00007 Industry Innovation and Competitiveness Agenda Industry Competitiveness 12 Industry Innovation and Competitiveness Agenda 3. Agriculture to meet increased demand for high quality food The United nations
expects world food demand to increase by 70 per cent by 2050 (United nations Food and agriculture organization, 2009.
so will demand for food products like fruit and vegetables, dairy products, meats, cereals and fish (Chart 7). Australia is already in a strong competitive position as we are relatively free from many serious agricultural pests and diseases,
This underpins forecasts for education exports to contribute more than $19 billion to our economy by 2020, particularly through students from China and India (International Education Advisory Council, 2013). 0 20 40 60 80
Projected demand of ASEAN countries for food products Source: ABARES, 2013. TPO00007 Industry Innovation and Competitiveness Agenda Industry Competitiveness THE CASE FOR REFORM 13 6. Innovative pharmaceuticals, biotechnology and medical devices manufacturing to leverage off Australia's strength
by our strong intellectual property environment and educated workforce (ABS, 2013b). 7. Tourism for the world's growing middle classes Australia ranks 11th in the world for tourism revenue, with around 6 million international visitors arriving here in 2013,
The growth potential of this‘visitor economy'is strengthened further by increasing domestic tourism as reflected in Chart 8. 8. Financial and professional services Australia's banking,
The financial and insurance services sector employs more than 400,000 people, and currently has more than $2 trillion of funds under management (ABS, 2014j;
) Exports of insurance and superannuation services have grown by an average of 10 per cent per annum since 2008 (ABS, 2014h.
wealth management services will remain in high demand. Reflecting the highly skilled, innovative nature of the Australian economy, professional, scientific and technical industries accounted for more than 7 per cent of value add in 2011-12 (Australian Workforce and Productivity Agency, 2013.
Technology and communication will continue to facilitate the provision of legal, accounting, engineering and other services across borders.
Chart 8: Tourism Expenditure Projections Source: Tourism Research Australia, 2013. TPO00007 Industry Innovation and Competitiveness Agenda Industry Competitiveness 14 Industry Innovation and Competitiveness Agenda To compete with the best in the world,
Australia must do more Australia's natural strengths and past economic reforms do not guarantee prosperity in the future.
While opportunities will grow over time, so too will competitive pressure. Australia's natural resources gave us a particular advantage in the early stages of Asia's development.
and services that Asia will demand. This competitive pressure has already been felt for some years in Australia
and to compete hard for sales of goods and services, as well as for skilled labour, for investor capital and for a place in the world's supply chains.
International institutions such as the International monetary fund (IMF), the OECD, the G20 and the World Economic Forum (WEF) have identified a range of policy settings that typically support
productivity and economic growth (see Box A2). Box A2: Policy settings for competitiveness, productivity and growth Macroeconomic stability through strong public finances, independent monetary policy aimed at low and stable inflation, a floating exchange rate,
and honest institutions. A well-developed financial system founded on sound prudential regulation that efficiently manages risk and channels savings to the highest return investments.
Stable, broadly based and efficient taxes that raise revenue while minimising market distortions and compliance costs.
Open trade and investment policies that provide access to international markets, expose domestic businesses to international competition and spread new technologies and practices.
and enables efficient communications and competitive energy costs. Risk-based regulation making and enforcement systems that target market failures and support relevant social, environmental or economic protections at the lowest cost.
TPO00007 Industry Innovation and Competitiveness Agenda Industry Competitiveness THE CASE FOR REFORM 15 Many of our competitors have recognised the global opportunities
and challenges and are acting to bring their economies into line with international best practice.
Advanced economies are reining-in inefficient government spending reducing corporate tax rates, deregulating and improving competition, making investments in infrastructure and skilled workforces,
and giving research a greater commercial focus. Singapore has cut the corporate tax rate many times, from 40 per cent 28 years ago to 17 per cent now (Prime, 2012;
) Canada is promoting competition in the telecommunications sector, including by capping wholesale domestic roaming rates to prevent wireless providers from charging other companies more than they charge their own customers (Government of Canada, 2014).
In February, Korea announced its Three-Year Plan for Economic Innovation, which includes a range of deregulation reforms.
Australia has many of the fundamentals required for a productive and competitive economy. The OECD ranks Australia around the average of its member nations on most aspects of government policy and we rate well on dimensions such as macroeconomic and financial sector policies, income and wealth, jobs and earnings,
there is little doubt Australia is missing opportunities and can do better across a range of areas.
Stronger market sector jobs growth despite increases in jobs in the resources and related sectors, employment outside the public related sectors of the economy has been weak (Box A3.
and industry and a weak early-stage venture capital market (OECD, 2013). Australia was ranked recently 81st out of the 143 countries for the efficiency with
2013b) and other imposts on Australian enterprises work against these advantages. For example, in its‘Opportunity at Risk'report, the Minerals Council of Australia (2012) noted that in Australia it takes around three years to get approval for a thermal coal project compared to around two years for the rest of the world.
Lowering compliance costs regulatory compliance costs also remain a major concern for Australian businesses. Almost 60 per cent of businesses in the Australian Chamber of commerce and Industry National Red tape Survey (2014) reported annual direct costs of more than $5
If not addressed, such constraints on our competitiveness will become an ever greater drag on Australia as global competition increases,
Jobs in the‘market'sector of the economy, on which long term economic growth and government revenues depend,
These‘non-market'sectors provide many important services and their growth is, in part, a response to community needs.
Strategy is about strengthening the economy and delivering benefits to the community, including through less reliance on government, freeing up business and more long-term investment.
To this end, the Government is pursuing world's best practice for competitiveness, productivity and growth, with reform on several fronts.
To support open trade and investment, the Government recently concluded negotiations of trade agreements with both Japan and South korea it is estimated the Korea Australia Free trade Agreement alone will add $650 million to the Australian economy every year from 2030 (Centre for International
Economics, 2014). To encourage greater quality and lower prices for the goods and services that businesses and consumers depend on,
the Government established a review of competition policy to increase domestic and international competition. To improve our education and training systems,
the Government is expanding the demand-driven higher education system to all sub-bachelor courses and is deregulating fees from 2016.
The Government is also establishing Trade Support Loans to help increase completion rates among Australian apprentices in priority occupations,
and a $476 million Industry Skills Fund to provide training and support services to small and medium enterprises.
To improve our workplace relations system the Government is amending the Fair Work Act 2009
The world's major economies have committed to undertake ambitious reforms with the goal of lifting collective G20 GDP by more than 2 per cent above the current trajectory over five years.
and will focus on reforms in investment and infrastructure, trade, competition, employment and participation. As G20 president, we will show leadership in presenting a new wave of economic reforms.
Agenda Industry Competitiveness 22 Industry Innovation and Competitiveness Agenda The Government's Industry Innovation and Competitiveness Agenda will foster stronger and more enduring economic growth.
in resources, services, manufacturing and agriculture. Strong businesses, free to play to our country's strengths,
or work practices before they spread more broadly through the economy. The competition that this elicits challenges incumbent firms to do better.
Entrepreneurs are important in building a dynamic and innovative economy. However entrepreneurs are less likely to pursue opportunities
when policy settings discourage appropriate risk taking behaviour. This is why the Government is laying the groundwork for Australian businesses to embrace structural economic changes,
innovate and build their competitive advantages. In furthering this vision, the Agenda's solution is not more government,
which has an important role to foster an economic environment where productive, self-reliant enterprises can flourish.
Government also has a role to address gaps and deficiencies in markets where they lead to significant social, environmental and economic problems.
While it is critical that policy settings are conducive to business investment and growth, it is businesses not politicians
and in which areas, to invest their capital. Government subsidies and other policies that have distorted these decisions,
The Government intends to scale back intervention in the economy to restore the balance. Lower government spending will allow taxation to be reduced sustainably over time.
Less government activity will reduce The Reform Agenda TPO00007 Industry Innovation and Competitiveness Agenda Industry Competitiveness 23 competition with private businesses for labour, land and capital.
and allow businesses the flexibility they need to adapt to the rapidly changing economic environment.
It provides a framework for boosting Australian industries'competitiveness and driving greater innovation and investment across the nation.
and builds on the Government's dedicated reform streams in taxation, competition, deregulation, energy, infrastructure and the Federation.
1. a lower cost, business friendly environment with less regulation, lower taxes and more competitive markets;
and 4. industry policy that fosters innovation and entrepreneurship. In developing reforms to promote these ambitions,
and investment, fostering innovation and entrepreneurship, facilitating the development of skills and capabilities in our people and businesses, reducing red tape and other business burdens,
and developing physical infrastructure. Broadly-based reforms in these areas are at the heart of the Competitiveness Agenda.
Strengthening entrepreneurship and small business The Government is committed to encouraging entrepreneurship and creating the best possible conditions for small and large businesses to thrive.
contributing strongly to national economic growth and competitiveness. There are over 2 million Australian small businesses (Department of Industry, Innovation, Science, Research and Tertiary education, 2012.
and often pioneer these before they spread more broadly through the economy. This is why small business entrepreneurs are important to future economic growth, improved job prospects and better living standards.
Getting the economic conditions right to encourage small business to grow, innovate and develop will yield wide benefits.
there are clear limits to the scope for sectoral policies to lift an economy's overall competitiveness.
and opportunities are likely to offer the highest returns on investment. In a market economy, which sectors prosper,
Strengthening management capabilities will enhance the capacity for small businesses to compete in a digitalised, global economy.
and the economy restructures. The Government is committed to fostering an innovative culture among small businesses
and improving the business operating environment, including by reducing red tape and increasing the quality and effectiveness of government engagement with small business.
The Competitiveness Agenda will improve the opportunities for all businesses. Small businesses will gain proportionally greater benefits as they are particularly vulnerable to the deadening effects of excessive red tape and other impediments to entrepreneurship.
Some initiatives in the Competitiveness Agenda have undergone already extensive consultation and development and will only require fine-tuning as they are implemented.
A lower cost, business friendly environment The Government will make it easier and cheaper to do business, particularly for small business, by:
and improving access to high-quality, low-cost inputs to business by opening the economy to greater domestic and international competition.
Regulation is necessary for a well-functioning economy and society, but there are costs that should not be ignored.
and risk assessments of some highly regarded regulators in other advanced economies not being recognised in Australia.
lead to swifter decisions and improve Australia's investment climate, while maintaining high environmental standards.
including working with stakeholder groups to develop criteria for accepting or adopting trusted standards and assessments.
The Framework uses six outcome-based performance indicators that cover communications, risk-based and proportionate approaches, transparency, reducing regulatory burden,
Australian governments rely on tax revenue to fund the public investment and services our economy and society depend on,
but taxes impose direct and indirect costs on businesses and individuals. Beyond their direct impact, taxes may also reduce the incentive to save,
more than 23 cents of value is lost to the economy (KPMG, 2010. Although dividend imputation reduces the burden of company tax in Australia for domestic shareholders,
at 30 per cent our company tax rate is high by international standards (Chart 10). The OECD has suggested that the Australian economy would benefit from a shift toward less mobile
and distorting tax bases (OECD, 2010b). This is because Australia is more reliant on corporate and personal income tax than the OECD average (OECD, 2014e).
A recent survey of businesses found tax compliance costs of around $18 billion for the Australian small and medium enterprise business sector in 2011-12 (Lignier et al, 2014.
Ambition 1 35 The Government is committed to a better taxation system to promote innovation, entrepreneurship, investment and growth.
Department of Environment, 2014. Fewer than 20 taxpayers contributed to the meagre revenue raised by the Minerals Resource Rent Tax,
Cutting corporate taxes will encourage investment, and should boost real wage growth and employment. The Government is committed to a simpler and more sustainable tax system.
These include the Temporary Budget Repair Levy on high income earners to pay down public debt and the indexation of fuel excise to fund critical investment in roads infrastructure.
and impose additional, often hidden, costs on the economy. Changes to tax law should not be seen as a‘quick-fix'solution
improving tax settings for productivity, international competitiveness and economic growth; improving incentives to work, including through the interaction of the tax and transfer systems;
During consultation with a wide range of stakeholders, options raised included: reforming the superannuation guarantee charge penalty regime to reduce its harshness
The Government is currently analysing options brought forward during consultation with stakeholders to better understand the compliance cost concerns of small business.
low-cost business inputs through greater domestic and international competition Reinvigorating competition across the Australian economy will help bring down costs for businesses and consumers.
and consumers who depend on the goods and services these industries produce. The Government is committed to opening up
and increasing competition across the economy to improve Australia's international competitiveness. Australian businesses use a range of domestic and international inputs.
Competition also encourages innovative businesses to enter the market, inspires existing businesses to improve and allows more productive businesses to replace others.
Competition also gives workers a greater array of employment options. In a competitive jobs market
Initiatives to increase international competition and improve market access In the 1980s, 1990s and early 2000s,
Australia opened up the economy to international trade and investment, lifting our competitiveness and living standards (Productivity Commission, 2005).
Australia has lowered our average tariff rates from around 13 per cent in the early 1970s to 2. 7 per cent in 2012, the lowest in the G20 (Lloyd, 2007;
clothing and footwear items, is scheduled to fall from 10 per cent to 5 per cent Opportunities from free trade agreements Australian automotive manufacturer Mtm has supplied high-quality automotive components to the Australian industry
For the past decade, Mtm has sought new opportunities to export its products. It has developed new relationships in China, Thailand,
adding around $3, 000 to the annual real income of the average Australian family (Centre for International Economics, 2009).
creating more opportunities for Australian exporters. The Government recently concluded trade negotiations with Japan and South korea,
and lift competition as a part of its G20 growth strategy. The Government is also examining the potential to reduce non-tariff barriers
Australian businesses also depend on foreign investment, so the Government is making it easier for significant investment to proceed.
Our average investment rate of 28 per cent of GDP over the 10 years to 2012 is considerably higher than the average investment in the G20 of 25 per cent and the 21 per cent average of the OECD (World bank
2014a). ) Australia's free trade agreements have included provisions to improve access to foreign capital. In addition, the Government will help significant investment to proceed
and contribute to growth, employment and transfer of new skills and technologies. To ensure that Australia is open for business,
the Government is appointing five Senior Investment Specialists to Austrade from the private sector. These specialists will facilitate foreign direct investment projects in areas of strength including agribusiness and food;
major infrastructure; tourism infrastructure; resources and energy; and advanced manufacturing, Trade advantages from our‘clean
and green'reputation Australia is renowned an internationally supplier of safe red meat and livestock. The Australian Agricultural Company Limited (AACO) is a world-leading provider of beef and agricultural products.
New business models are starting to rely on immediate transfer of international cargo to domestic transport hubs.
consistent with the B20 recommendation for practical trade facilitation through cuts to red tape. services and technology.
These align with the five national investment priorities for investment attraction that have been agreed by all States and Territories and the Commonwealth in February 2014.
Removing barriers to professional services investment Australia has an open and competitive professional services sector,
particularly in the areas of legal, accounting, architectural and engineering services. Liberalisation has positioned Australia to take advantage of the internationalisation of professional services, both through increased foreign investment in Australia and opportunities for Australian businesses through better linkages to overseas markets.
However, there are a few remaining barriers which discourage investment and limit the continued expansion of Australia's professional services sector.
Acknowledging the Commonwealth does not have Constitutional responsibility for this policy area, the Government will encourage relevant State
and Territory governments to remove remaining barriers that restrict foreign investors in professional services from forming certain types of legal entities.
to promote competitiveness and increase foreign investment. Increasing domestic competition to reduce costs and improve goods
and services Australian businesses rely on a range of domestically produced goods and services. Where there is insufficient domestic competition or poor regulation,
business can face higher prices, poorer services and less variety. The National Competition Policy reforms that followed the Hilmer Review in the 1990s had a significant and positive effect on the Australian economy.
The Productivity Commission (2005) estimated productivity improvements in infrastructure industries targeted by these reforms permanently increased Gross domestic product by 2. 5 per cent.
However the pace of competition reform has slowed with the end of the main National Competition Policy reforms in 2005
and has gone arguably backward in some areas. The IMF, OECD and World bank (2014) have highlighted that competition reforms could reap significant gains internationally.
Following the release of Government commissioned reviews into Competition Policy, the Renewable Energy Target and the Financial System,
and the finalisation of the Energy White paper, the Government will consider the recommendations and work with the States as necessary to reduce the cost of,
and improve access to, the goods and services businesses depend on. The Competition Policy Review is examining
whether Australia's competition policies are driving the most competitive outcomes, given the changes to the Australian economy in recent decades and our increased integration into global markets.
It will determine where competition can provide further benefits to Australian consumers and businesses. The Review is also examining the regulations
and regulators to ensure they are operating effectively and supporting competition, while minimising the burden on Australian businesses.
TPO00007 Industry Innovation and Competitiveness Agenda Industry Competitiveness The Reform Agenda: Ambition 1 41 The Government considers that Australia is not fully realising the investment
and export potential of our rich energy resources due to burdensome regulations and restrictions at all levels of government.
This is why the Government is moving to reduce regulatory restrictions and costs on the energy sector.
Until recently, offshore petroleum activities in Commonwealth waters required assessment and approval by both the National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA) and the Commonwealth Minister for the Environment
under the Environment Protection and Biodiversity Conservation Act 1999. The Government has simplified already this process by making NOPSEMA the sole designated assessor for these activities in Commonwealth waters.
The reform will save the industry $120 million annually. We are working with the States
attracting investment and creating a stable investment environment; putting downward pressure on electricity price rises, increasing competition and consumer choice,
and driving regulatory and market reform to constrain future price rises; and reducing unnecessary regulation while protecting consumers and the environment.
Box B3: Australia's energy resources and the cost of energy for Australian businesses and consumers Australia has abundant energy resources.
In the case of electricity prices, this reflects heavy investment in utilities infrastructure and also costly environmental policies (Department of Industry, 2013b.
Recently, upward pressure on prices has flowed from higher costs of production and competition from higher priced international markets.
We will encourage regulatory settings that do not lead to over-investment in infrastructure and increase transparency in the gas market to improve certainty for businesses.
promote competition in electricity generation and retailing; support cost reflective pricing; and better regulate transmission and distribution monopolies.
and increase competition in the public sector. We are privatising Medibank Private and have initiated scoping studies into the future ownership and delivery arrangements of Australian Hearing, Defence Housing Australia, the Royal Australian Mint,
and the registry services of the Australian Securities and Investment Commission. The Government's Asset Recycling Initiative will provide incentive payments to the States to privatise assets
the Government is applying a contestability framework to promote competition and efficiency in all areas of government activity.
The Financial System Inquiry is examining how the financial system could be positioned to best meet Australia's evolving needs and support economic growth.
Together with construction, the financial services and insurance industry was second only to mining in its contribution to economic growth last year
and the competitiveness of financial services is critical to the broader Australian economy (ABS, 2014b). As G20 president in 2014, Australia is focusing the G20's efforts on delivering key aspects of the G20's financial regulation reforms.
The firm's applications and consulting services help to administer financial products for the investment, superannuation, pensions, life insurance and private wealth industries.
more efficient coastal shipping services could help lift Australia's competitiveness and lower prices for consumers (Australian Competition and Consumer Commission, 2014).
The Coastal Trading (Revitalising Australian Shipping) Act 2012 established a new licensing system restricting competition from foreign ships on Australian coastal routes,
Higher freight costs erode the viability of Australian businesses that use coastal shipping services. These include Australian producers and manufacturers of products like sugar, cement, fertiliser, steel and aluminium,
Improving competition in the coastal shipping sector could give onshore businesses access to efficient flexible and cost-effective shipping services, supporting jobs growth and yielding broader economic benefits for Australia.
TPO00007 Industry Innovation and Competitiveness Agenda Industry Competitiveness The Reform Agenda: Ambition 2 45 Ambition 2:
encourages investment, and supports jobs growth and higher wages, reflected in Table 2 (International labour organization, 2011).
The paper argues that investment in STEM is a key contributor to boosting productivity, creating more and better jobs,
enhancing competitiveness and growing an economy. For example, one estimate is that scientific and technological advances have produced roughly half of all United states economic growth in the last 50 years.
STEM may become an even more essential component of jobs in the future. International research indicates that 75 per cent of the fastest growing occupations now require STEM skills and knowledge.
The effectiveness of greater investment in STEM will depend on appropriate adaptation to the Australian context.
However, the Review of the Demand Driven Funding System (2014) suggested universities need greater control over their capacity to raise resources
Also, stakeholders raised concerns in the Review of Higher education Regulation regarding the burden of reporting requirements (Phillipskpa, 2013.
In the 2014-15 Budget, the Government announced the expansion of the demand driven system to all accredited bachelor and sub-bachelor courses at all approved higher education institutions,
Capitalising on international education opportunities Monash University has over 64,000 students 21,000 of them international with offshore campuses in Malaysia and South africa,
However, concerns have been raised about the VET system's ability to deliver the skills demanded by the Australian economy.
The Government has established a taskforce to work with key stakeholders, including State governments, registered training organisations, industry groups and employers,
As an initial step, the 2014-15 Budget provided $476 million to establish the Industry Skills Fund to support the training needs of small to medium enterprises not readily met by the national training system.
and training support services over four years. It will prioritise assistance to small and medium enterprises (SMES) TPO00007 Industry Innovation
and Competitiveness Agenda Industry Competitiveness 50 Industry Innovation and Competitiveness Agenda to position themselves to take advantage of new technology,
innovative work practices, new and emerging opportunities, opening export markets and emerging economies. Larger companies may apply to access the Fund,
mining equipment, technology and services; medical technologies and pharmaceuticals; oil and gas; and advanced manufacturing. The Government is also providing eligible apprentices with financial assistance of up to $20, 000 over the life of their apprenticeship, through the Trade Support Loans programme, for those undertaking qualifications leading to occupations listed in the Trade
Supplementing support for maths, science and computing in schools The Chief Scientist has identified a critical need for learning resources that will engage students in mathematics,
'These maths-in-schools programmes for primary and secondary school students will deliver innovative and engaging teaching
Building on these maths education programmes, the Government will provide a further $3. 5 million to encourage the introduction of computer coding across different year levels in Australian schools.‘
‘Coding across the curriculum'will contribute to addressing Information and Communication Technology (ICT) industry feedback
or advanced diploma with opportunities for employment with the businesses involved in the programme. The Government will look to locate the programme in an area with access to industry but high youth unemployment.
A new model for apprenticeship support services The Government will implement new arrangements for delivering support to Australian apprentices and their employers from 1 july 2015.
and completion rates by providing services including: connecting apprentices and employers through targeted job matching;
moving the national regulator, the Australian Skills Quality Authority (ASQA), to a new risk based model with improved information and education services, better recognition and greater autonomy
and information sharing between key VET stakeholders, and possible reforms focusing on VET in schools and school based apprenticeships.
the COAG Industry and Skills Council and the Reform of the Federation White paper on these and other opportunities to improve the VET system nationally.
Attracting the best and brightest to meet Australia's skills needs Skilled migration is critical for a strong and vibrant economy.
The know-how, innovation and entrepreneurship of highly skilled migrants can lift a country's productivity and competitiveness directly.
As their skills are in high demand globally and are readily transferable across borders, these workers have a great many choices about where they work.
Expanding the investment visa programme The Government will also expand and improve the significant investment visa programme.
At present, Significant Investor visas (SIV), which can provide a pathway to permanent residency, are available for applicants having an eligible investment in Australia of A$5 million for a minimum of four years.
An internal review in 2014 by the Department of Immigration and Border Protection found that Australia faces stiff competition from other countries with similar investor visa programmes,
which often have less onerous application criteria and processing requirements. It also explored ways to diversify the sources of investors under the programme
and better direct additional foreign investment, while maintaining safeguards to ensure the migration programme is misused not.
align the criteria for eligible (or‘complying')investments with the Government's national investment priorities.
The investment eligibility criteria will be determined by Austrade in consultation with key economic and industry portfolios;
and seize new opportunities and workers must be free to negotiate working arrangements that suit their personal ambitions and circumstances.
The Australian economy continues to adapt and change as the world changes and our workplace relations system must do the same,
but we want to ensure it helps build a more stable, fair and prosperous future for Australia's workforce, businesses and the economy.
with investigative and information-gathering powers modelled on those available to the Australian Securities and Investments Commission.
only if it is covered by an enterprise agreement, or it has been invited. Further, the Bill ensures the Fair Work Commission can properly deal with excessive right of entry visits for example,
However, the Fair Work Act currently allows enterprise agreements to restrict the use of IFAS.
This means that employees covered by an enterprise agreement may be denied the opportunity for more suitable workplace arrangements
talk later'loophole in the good faith bargaining rules The Fair Work laws enable industrial action in support of claims for a new enterprise agreement before bargaining has commenced.
and business during enterprise bargaining and only in support of claims that are not manifestly excessive
and employers to consider productivity improvements when bargaining for an enterprise agreement. Boosting the workforce participation of parents The Government aims to boost women's workforce participation to help increase Australia's labour force and GDP,
and enable provision of more flexible services. The Government will respond to the Commission's recommendations after it finalises its report in October 2014.
increasing public investment in economic infrastructure; improving infrastructure project selection, funding, financing and delivery; and encouraging greater private sector investment in infrastructure.
Economic infrastructure for the 21st century Economic infrastructure roads, rail, ports, airports, energy, water and communications networks is key to Australia's competitiveness.
Australia's domestic infrastructure demands are growing rapidly. By 2060, Australia's population will have increased by over 15 million,
Australia's trade-related infrastructure demands are also growing rapidly. Global GDP is expected to double by 2030 and trade will grow even faster, particularly within Asia and between major regions (OECD, 2011a;
BETTER ECONOMIC INFRASTRU CTURE TPO00007 Industry Innovation and Competitiveness Agenda Industry Competitiveness 62 Industry Innovation and Competitiveness Agenda While investment in better economic infrastructure is needed to support Australia's competitiveness,
There has been significant investment in public infrastructure in recent years, but the investments have not always been the right ones (ABS, 2014g;
Productivity Commission, 2014d. There is also scope for increased private sector involvement and investment in public infrastructure, particularly in transport.
The Government is making public and private investment in the right infrastructure a priority. Box B5:
Increasing demands on Australia's infrastructure Increasing congestion is costing an estimated $15 billion per year (Department of Infrastructure and Regional Development, 2014c.
Travel by car reached 267 billion passenger kilometres in 2011-12, with 175 billion of these travelled on capital city roads (BITRE, 2013c).
Bulk ports are crucial for handling the importation and distribution of petroleum, cement materials and bauxite-based commodities between mining areas, refineries and smelters (BITRE, 2013a.
highlighting the importance of sustainable investments in broadband technology and regulatory regimes that ensure the benefits of low cost distribution via the internet are passed on to businesses and consumers.
Ambition 3 63 Increasing public investment in economic infrastructure As announced in the 2014-15 Budget,
the Government is delivering an $11. 6 billion Infrastructure Growth Package to support economic growth, give businesses the opportunity to prosper,
and expand the economy's long term productivity. Over the next six years, the package will take the Commonwealth's total investment in transport infrastructure to $50 billion,
bringing forward significant economic infrastructure projects. The package includes a $5 billion Asset Recycling Initiative to unlock new infrastructure investment.
The Government will provide incentive payments to States and Territories that privatise State-owned assets where the proceeds are reinvested in new productivity enhancing infrastructure.
As well as encouraging States and Territories to unlock their infrastructure balance sheets the initiative will create opportunities for investors and increase private sector investment in quality infrastructure assets around Australia.
The package will bring forward investment in key roads and boost funding for existing infrastructure programmes,
including: East West Link (stage 2) in Melbourne; Westconnex in Sydney (stage 2; the Perth Freight Link in Western australia;
The Government will examine further investments and upgrades to the national rail network where appropriate.
The Infrastructure Investment Programme will boost the Commonwealth's total investment in transport infrastructure to $50 billion through to 2019-20.
This is expected to leverage a further $75 billion of investment from the States and Territories and the private sector.
Taken together, this means in excess of $125 billion of additional infrastructure investment, adding an estimated 1 percentage point to GDP once construction is completed.
The Government also recognises that communications infrastructure is a key enabler for a competitive economy.
and stimulate competition by rolling out new mobile base stations. The Government is committed also to starting the detailed planning necessary to build new dams to ensure water security for communities and industries.
A Ministerial working group has been established to identify priorities for fast-tracking investment in water infrastructure. It has considered a variety of options
With no action, Kingsford Smith airport risked reaching capacity causing Australia to lose out on around 80,000 additional jobs and $34 billion (in 2010 dollars) in economic activity by 2060 (Department of Infrastructure
the Government has commissioned Infrastructure Australia to audit critical water, energy, communication and transport infrastructure in northern Australia and separately across the nation.
The 15-year infrastructure plan will provide a blueprint of nationally significant infrastructure required to drive economic growth,
For the first time, Australia will have integrated an plan of infrastructure needs across transport, water, communications and energy. This will enable better investment planning
and allow governments to put in place appropriate policy and regulatory processes to support that growth,
In addition to ensuring the right investments in new infrastructure it is important that the best use be made of existing infrastructure assets.
Encouraging greater private sector investment in economic infrastructure The Government is seeking to increase private sector investment in economic infrastructure.
and pension funds to invest in the development of Australian infrastructure as part of the Government's foreign investment priorities.
which has reduced the commercial viability of private sector investment. However, government budgetary constraints mean that the traditional model of funding
and financing infrastructure is no longer sustainable, in the absence of higher taxation or lower government spending on other services.
Attracting greater private sector investment in appropriate circumstances will drive efficiencies in building and operating infrastructure
allowing scarce public funds to be focused on delivering essential services the private sector cannot. TPO00007 Industry Innovation and Competitiveness Agenda Industry Competitiveness The Reform Agenda:
Ambition 3 67 To leverage private investment, the Government is prepared to use alternative financing arrangements to complement traditional grant funding.
equity investments, phased grants and other targeted payments. These mechanisms will be considered on a case-by-case basis. An example of this approach is the Government's $2 billion concessional loan to accelerate delivery of the second stage of the Westconnex project in New south wales.
including transport, water and energy services (Infrastructure Australia, 2012. As noted earlier, the Government's $5 billion Asset Recycling Initiative will provide incentives for States and Territories to privatise State owned assets.
and create opportunities for Australian and foreign investors to invest in mature government assets. The Government will look for opportunities to promote the appropriate use of user charging
which can help fund new infrastructure, promote‘unsolicited bids'for new infrastructure and create greater visibility of future infrastructure needs through Infrastructure Australia's 15 year infrastructure plan.
In addition, we have appointed to Austrade a Senior Investment Specialist with expertise in public-private partnerships to facilitate investment by foreign construction companies, financiers and sovereign wealth funds into Australian infrastructure.
this Senior Investment Specialist will work closely with States and Territories as well as Commonwealth government agencies responsible for infrastructure development.
and focusing our research spending to stimulate innovation and entrepreneurship, improve competitiveness, and create new job opportunities for Australians.
Industry policy will seek to capitalise on Australia's strengths, in contrast to past approaches that supported industries that proved to be uncompetitive.
and to tailor industry policy to help capitalise on emerging opportunities. The broadly-based reforms of our first three ambitions focus on improving the general business environment
and will remain the mainstays of efforts to lift competitiveness. However, we believe the Government also has a facilitation
and coordination role so businesses can take better advantage of quickly evolving opportunities. Government support can help businesses to build the skills
For example, small and medium enterprises face challenges in obtaining useful information about overseas markets and about the detailed requirements to sell into global supply chains.
Ambition 4 69 Austrade provide reliable information about markets, technology and business models to small and medium enterprises, accelerating industry growth and job creation.
where its use by one enterprise does not preclude use by another. This could cause it to be undersupplied
focusing on the way business connects with government and the services that government offers businesses. The Government is working to streamline access to essential information for all Australian businesses
instead of generating a myriad of services and access points. Delivered through an improved business. gov. au website and hotline,
and services they require. This includes information on regulations in Australia and overseas, information about market opportunities flowing from free trade agreements and insights into business improvement strategies.
The 2014-15 Budget also contained new programmes to help established businesses grow and new businesses establish themselves in the marketplace,
will support the commercialisation of good ideas and lift the capability of businesses to capitalise on emerging opportunities.
000 for small and medium enterprises to engage university or science agency (e g. CSIRO) researchers on specific projects;
help start-ups commercialise their good ideas with advice from experienced entrepreneurs to facilitate connections with customers and investors;
This investment will ensure Australia can continue to advance world leading medical research projects and attract and retain first class researchers.
or indirectly by supporting improved productivity and economic growth. Upgrading the skills of all types of workers,
is central to firm performance in knowledge-based economies. The quality of management is particularly important to enable quick adaption to evolving markets and changing circumstances.
This will support the training needs of small to medium enterprises that cannot be met readily by the existing national training system.
innovative work practices, new and emerging opportunities, opening export markets and emerging economies. Larger companies may apply to access the Fund,
mining equipment, technology and services; medical technologies and pharmaceuticals; oil and gas; and advanced manufacturing. The Industry Skills Fund will be complemented by the Trade Support Loans Programme,
The Government is also helping Australian businesses develop international markets and win productive foreign direct investment.
and investment through leadership of trade missions by the Prime minister Innovative technologies help Tasmania's AQ1 Systems compete in the world Specialising in optical and acoustic sensing technology,
and Insurance Corporation (EFIC) with an additional $200 million in capital in the 2014-15 Budget and is refocusing EFIC to increase its capacity to finance small and medium enterprises.
which will help small and medium enterprises increase exports. EFIC provides finance and insurance solutions to assist Australian exporters overcome financial barriers when growing their business overseas,
or overseas investments where their bank is unable to provide all the support they need. In addition
accelerate private sector investment in high value non-automotive manufacturing sectors in Victoria and South australia;
and support investment in non-manufacturing opportunities in affected regions. TPO00007 Industry Innovation and Competitiveness Agenda Industry Competitiveness 72 Industry Innovation and Competitiveness Agenda Further proposals Proposal 13:
with the right enabling environment, can be world leaders. Backing our competitive strengths and building on the Entrepreneurs'Infrastructure Programme,
The Centres will encourage organisations to work closely together to unlock commercial opportunities and reduce risk.
mining equipment, technology and services; oil, gas and energy resources; medical technologies and pharmaceuticals; and advanced manufacturing.
The Centres will have the flexibility to provide services tailored to the needs of their industry.
Ambition 4 73 taking practical steps with governments to improve the regulatory environment; facilitating new commercial partnerships through supporting industry-led projects between SMES and large businesses,
and with the research sector, to develop innovative products and services; enhancing businesses'ability to enter global value chains and improving workforce skills, building on the services available through the Entrepreneurs'Infrastructure Programme;
and developing annual industry knowledge priorities to inform the research sector of industry needs and commercialisation opportunities.
Each of the five Centres will receive funding of up to $3. 5 million per year. The Centres will be required to establish a plan to become self-sustaining after four years
attract private sector investment and bring new ideas to market. This will address the lack of early stage finance for commercialisation.
Food scientists would help small and medium enterprises to develop the desired product characteristics. Specialist advice on intellectual property protection, marketing
and exporting in differing Asian markets would help small and medium enterprises succeed in these markets.
The Government will provide $60 million through the Entrepreneurs'Infrastructure Programme to co-fund commercialisation opportunities.
The Government's investment will be no more than 50 per cent and up to $1 million in project funding.
Funding will be provided on a competitive basis. Success of the Centres will be measured by increased investment, employment, productivity and sales, reductions in red tape,
and provide advice to the Government on its overall approach to investment in science and research, areas of national strength and future need,
and opportunities to improve the impact, focus, and quality of Australia's investment. It will also focus on improving collaboration
and commercialisation of Australia's high quality science and research output, including through improving connections between government, research organisations, universities and businesses.
they are supported by entrepreneurship and a flourishing start-up community (Decker et al, 2014). Indeed, many of the new jobs generated in OECD economies
since the global financial crisis were in small, young businesses (Criscuolo et al, 2014). Entrepreneurs and start-ups are important for testing new ideas,
developing new products and implementing new business models (Carlino & Kerr, 2014), and international research suggests that companies in
because it taxes employees before they have the opportunity to convert their options to shares
and stakeholders have noted that the changes detracted from the goal of commercialising good ideas in Australia.
and keeping Australian companies competitive in an international economy, which includes giving entrepreneurial start-ups the chance to employ the best people.
Companies in the early stages of development may face problems with valuation and liquidity. The Australian Taxation Office will work with industry to develop
The Australian Securities and Investment Commission will also be consulted, given its oversight of disclosure documents involving the offer of financial products (like options and shares).
To encourage entrepreneurship and small business growth the Government's changes will mean, under certain conditions,
'or early stage capital to help innovative start ups and other small enterprises develop. CAMAC (2014 recommended an alternative regulatory framework be developed
which could boost competitiveness and innovation by increasing the funding options available to entrepreneurs. The Chief Scientist has recommended also the Government facilitate access to novel sources of equity funding,
Small business covers the full gamut of activities from retailing, hospitality and personal services through to small building, fabrication and trade-based firms,
and often pioneer these before they spread more broadly through the economy. Enabling small businesses to reach their potential will
Their scale means they can find it more difficult to access capital or carry and spread risks themselves,
The Competitiveness Agenda is designed to provide a competitive environment in which any business, whether big or small, can succeed on its intrinsic merits,
nevertheless gain proportionally greater benefits given that they are particularly vulnerable to the deadening effects of excessive red tape and other impediments to entrepreneurship.
The Government is also adopting a set of Small Business Engagement Principles to assist government agencies to engage effectively with small business to identify opportunities to reduce red tape
opportunities to reduce over-burdensome regulations and imposts will be identified and government agencies will better understand the impact policies
The Strategy is about strengthening the economy and delivering benefits to the community, including through less reliance on government, freeing up business and more long-term investment.
Standing still on economic reform is not a viable option. Improving Australia's competitiveness is essential
if we are to sustain our economic performance as the population ages and the mining investment boom fades.
if we are to successfully grasp the opportunities presented by the economic strength of Asia and integration of the global economy.
The Budget also put in place the building blocks needed for our future prosperity by prioritising investment over immediate consumption.
To support open trade and investment, the Government has concluded successfully trade agreement negotiations with both Japan
TPO00007 Industry Innovation and Competitiveness Agenda Industry Competitiveness IMPLEMENTING OUR ECONOMIC ACTION STR ATEGY 85 Many of the drivers of competitiveness are being examined through a range of reviews including the Competition Policy Review
increase domestic and international competition to encourage greater quality and lower prices for the goods and services businesses and consumers depend on;
and foster an efficient, competitive and flexible financial system, consistent with stability, prudence and public confidence.
On the big issues for competition policy, workplace relations and taxation, the Government has committed to major reviews.
and fostering innovation and entrepreneurship in our industries. The Government will hold a series of stakeholder roundtables on the Competitiveness Agenda, around the country, over the coming months.
Each roundtable will focus on one of these four ambitions. In addition to these broader consultations, the Government will undertake more targeted consultations on many of the specific proposals.
Consultation pathways Reform Consultation pathway Projected timeframe A lower cost, business friendly environment 1. Accepting trusted international standards and risk assessments The Parliamentary
Secretary to the Prime minister will continue consultations with industry and Ministers on opportunities to reform.
Streamlining certification of medical devices The Minister for Health will oversee stakeholder consultations to support implementation of this reform.
Late 2014 2. Shifting the culture of regulation The Department of the Prime minister and Cabinet has consulted regulators and relevant stakeholders on the Regulator Performance Framework.
Late 2014 early 2015 5. Reducing superannuation compliance burden The Government is currently analysing options brought forward during consultation with a wide range of stakeholders to better understand the compliance cost concerns of small business.
Late 2014 6. Trusted Trader Programme The Australian Customs and Border Protection Service, supported by a dedicated Industry Advisory Group, will conduct stakeholder consultations to co
Mid 2014 late 2014 7. Removing barriers to professional services investment The Department of Foreign affairs
Late 2014 early 2015 8. Examine coastal shipping regulations The Government is currently analysing options brought forward during consultation with a wide range of stakeholders to better understand the impact of coastal shipping regulations. 2015 TPO00007 Industry Innovation
and innovation in schools The Department of education will consult stakeholders to support implementation of these reforms.
and Training system The Government's VET Reform Taskforce has undertaken significant stakeholder consultation throughout 2014.
The Government will continue stakeholder consultation on proposed reforms to the VET sector. 2014 mid 2015 11.
Liberalising the subclass 457 visa programme The Minister and Assistant Minister for Immigration will consult stakeholders on changes to 457 visas and implementation of the 457 Integrity Review.
Expanding the investment visa programme The Minister for Trade and Investment and Assistant Minister for Immigration will consult stakeholders on the implementation of the visa enhancements.
Late 2014 TPO00007 Industry Innovation and Competitiveness Agenda Industry Competitiveness 90 Industry Innovation and Competitiveness Agenda Reform Consultation pathway Projected timeframe Industry policy
that fosters innovation and entrepreneurship 13. Establishing Industry Growth Centres The Minister for Industry will consult with stakeholders on the implementation of Industry Growth Centres.
Late 2014 14. Boost commercial returns from research The Ministers for Industry and Education supported by the new Commonwealth Science Council, will lead consultations with the education
Improve taxation arrangements for Employee Share Schemes The Department of the treasury will conduct stakeholder engagement to refine legislation prior to introduction.
Crowd-sourced equity funding framework The Department of the treasury will conduct stakeholder engagement on a potential crowd sourced equity funding regulatory framework.
and Resource Economics and Sciences ABCC Australian Building and Construction Commission ABS Australia Bureau of Statistics AIG Australian Industry Group ASQA Australian Skills Quality
Authority BAS Business activity Statement BCA Business Council Australia BITRE Bureau of Infrastructure, Transport and Regional Economics BREE Bureau of Resources and Energy Economics CAMAC
Symonds RBA Reserve bank of Australia RTO Registered Training Organisation SIV Significant Investor visa SME Small and Medium Enterprise STEM Science
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