Australia must embrace a new era of innovation and economic reform to rebound from recession and fix an inefficient economy, according to a new report published today.
The Committee for Sydney report, supported by economic research and modelling from EY, argues that Australia will not be able to regain its pre-COVID levels of prosperity without fundamental reforms, including researching and developing new products and services and investing in globally competitive industries.
It recommends a suite of reforms, including increasing Research & Development spending to far exceed the OECD average, making entrepreneur visas much easier to access, reforming the tax system and helping more international students to stay in Australia after graduation.
In new analysis, the paper finds that increasing Australia’s R&D spend to the OECD average would create $10 Billion and 22,000 additional jobs each year.
Successive Federal governments have struggled to deliver economic reform in Australia, but the report argues that the COVID-19 pandemic creates an unavoidable imperative to take action.
Australia fell into recession earlier this year for the first time in 28 years and the International Monetary Fund predicts that in 2020 Australia’s GDP will contract by 4.5% and unemployment will reach at least 7.6%.
The report highlights that almost 30 years of uninterrupted economic growth has had the unfortunate side-effect of reducing the impetus to reform our economic and social systems and led to complacency and a lack of innovation.
To become a world leader in innovation, the Committee advocates for five major actions:
- Invest government dollars in important R&D efforts.
- Make it easy to start new companies and create good jobs.
- Make Sydney’s underlying economic systems more efficient.
- Make it easy for talented people to come and stay in Sydney.
- Give Sydneysiders the skills they need to be successful.
Key policy reforms advocated in the report include:
- Increase Research & Development spending to far exceed the OECD average – Australia’s total R&D spend has dropped to just 1.79% of GDP, well below the OECD average of 2.37%.
- Fund National Missions – ‘moonshots’ that aim to solve big problems are the basis for public, private and university investment into innovation.
- Expand access to employee share schemes – which allow small start-ups to offer employees stock or options, helping cash-strapped start-ups to attract, retain and motivate talented staff without paying high cash salaries.
- Reform the taxation system – eliminate or substantially reform payroll taxes, replace state stamp duties with a broad-based land tax and consider increasing the base or rate of the GST.
- Speed up the internet – legislate to give NBN Co an objective target of ensuring that Australia is able to enter the top 50% of OECD countries for broadband speed by 2030, and the top 25% by 2035.
- Make it easy for talented people to come and stay in Sydney – make it easy for entrepreneurs to move to Australia by reducing the funding requirements and providing a pathway to permanency.
- Make it easier for high skilled people to work in Australia under Global Talent visas – by reducing the income threshold and upfront costs for sponsoring firms.
- Support international students to stay in Australia – give every student who completes a degree in Australia access to a 4-year post-study work visa.
- Plug the funding gap for universities – Governments should provide more funding to universities, both in the short and long-term, who have been drastically affected by the COVID-19 crisis.
- Create a substantial increase in new Australian start-up companies – currently, there are nearly 500 unicorns (start-ups valued at US$1 billion) in the world, but only 4 in Australia, a situation described in the report as “underweight”.
Gabriel Metcalf, CEO of the Committee for Sydney said that the report highlights the challenges faced by the Australian economy:
“Australia needs to make some difficult but important reforms in order to reform from recession and not be left behind by the changing world economy. COVID-19 will lead to the biggest loss of economic activity in Australia since WW2. How we respond will have a fundamental impact on our economy and society”
“Economic downturn means many companies will close, and jobs will disappear. Only the innovation economy offers a real way to replace these with good new jobs, and to maintain national income. Without a major investment in innovation by governments at all levels, Australia will not regain its living standards for many years.”
“Many of the reforms proposed in this paper have been considered for years, but the current crisis makes their immediate implementation necessary. Many of these reforms have substantial costs, but the alternative – sustained economic decline – will cost much more.”
“Right now, countries like Canada are seizing the opportunity coming out of COVID and poaching the smartest people and most promising companies from around the world Australia has the potential to do the same – if we move now.”
The Hon. Gabrielle Upton MP, Parliamentary Secretary to the NSW Premier, welcomed the report, saying:
“The ideas that come from Research & Development can build new companies, jobs, products and services. This is why accelerating investment into Research & Development is so important and absolutely crucial in light of COVID-19.
I commend the Committee for Sydney for their Report which yet again highlights the positive impact of Research & Development on our community’s economic and social wellbeing.”
Notes for Editors:
- The Committee for Sydney is an independent think tank and champion for the whole of Sydney, providing thought leadership beyond the electoral cycle. The Committee aims to enhance the economic, social, cultural and environmental conditions that make Sydney a competitive, resilient and liveable global city. The Committee has a diverse membership with over 150 member organisations: including the major corporate sectors driving Sydney’s economy; strategically minded local authorities; key NSW Government departments and agencies; not- for-profit organisations; and leading arts and sporting institutions. Members help develop and deliver priorities, provide expertise and ensure a representative geographical spread across the greater Sydney region.