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Innovation has the power to drive economic growth, create wealth and lift employment in Australia, as it has done in the past and is currently doing for countries like the United States, China, Germany and New Zealand.
"Urgent action is required from the government, regulators and capital markets community to get Australia innovating again."
Kristin Stubbins & Chris Dodd, PwC
But the regulatory environment, a growing aversion to risk, restricted access to capital and the absence of thriving, concentrated 'hubs' of activity appear to be stifling the opportunity.
A PwC Capital Markets Forum which brought together industry participants and regulatory and policy authorities conceded Australia's penchant for giving the world radical inventions like the Cochlear Implant, polymer notes and Wi-Fi had fizzled out for a number of reasons.
Urgent action is required from the government, regulators and capital markets community to get Australia innovating again. Action is also needed to accelerate the commercialisation of local ideas to stop home-grown talent from venturing offshore.
According to IP Australia's 2014 Report, Australian residents filed 3061 patent applications domestically and 9012 abroad in 2013. These are not good numbers.
They highlight Australia's inadequate funding and support for start-ups and the need to better connect the public, private and tertiary sectors to ensure money and resources find their way to the best ideas.
Innovation hubs
Looking around the world, especially in Silicon Valley, innovation hubs are connecting human and financial capital. They are facilitating the often difficult maturation process from idea to venture to enterprise.
A key priority should be to turn Sydney or Melbourne into a buzzing innovation hub for the region.
Ideally, Australia should be a place where international talent and companies want to come to develop their ideas.
However, without government-backed incentives like tax concessions, the likelihood of that goal being achieved is poor.
Apart from tax, other crucial incentives include positive public policy and regulation measures which facilitate new ways to access capital and encourage existing businesses to embark on new partnerships with entrepreneurs and start-ups.
A RISK-ADVERSE CULTURE
Australia has progressively developed a culture of safety, where failure is intolerable. As a nation, Australians are focused on holding down a job and buying property.
Housing and other property constitutes more than 60 per cent of the median household's assets. The Reserve Bank of Australia last month revealed Australian investors spent $A6 billion on the property market.
Both within and outside superannuation, the main investments are in blue chip shares and cash – low risk, 'vanilla' investments.
We need to encourage a shift towards reasonable risk taking. We need to get more Australians willing to 'have a go' when it comes to both inventing and investing in new ideas.
This new culture must be driven by young people, teachers, writers and leaders in the creative arts sector not only the corporate sector.
Leaders in the community need to share their success stories in the context of failure and risk taking as a positive. They need to make a personal and public commitment to encouraging innovation and entrepreneurship.
Start-ups and venture capital funds, ideally aided by government-backed incentives, also have a responsibility to entice investors by demonstrating the commercial viability of their ideas as well as their ability, drive and commitment to achieving success.
Overall, Australians need to take their blinkers off and be open to new and different investment opportunities.
PwC's 2015 Capital Markets Forum
Key themes to emerge from the forum included:
• The importance of fostering innovation for Australia's future prosperity.
• The wholesale effect the sharing economy, epitomised by online marketplaces, is having on trust.
• How technology is disrupting and disintermediating traditional businesses and the way we connect with each other.
• The need to build a bridge between government, business and academia to ensure we get capital to the brightest ideas.
• Changing Australia's blasé, risk averse culture from one which is all about 'fair go' to one where more people are willing to 'have a go'.
• The role of regulation in encouraging and hindering innovation.
Kristin Stubbins is strategy & markets leader at PwC & Chris Dodd is managing partner of PwC Australia's Melbourne Office.
This document is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
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Australia urgently needs innovation
2015-08-07
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