To borrow a phrase from George Orwell, the Turnbull government’s innovation statement deserves two cheers.
There are many positives, starting with the overarching message that investment in science and technology is needed for Australia’s future prosperity.
This was something that Tony Abbott failed to grasp, as shown by his funding cuts for the CSIRO which led to many scientists losing their jobs.
The biggest slice of money in the innovation statement will shift funding for science infrastructure from being year-to-year, to allocations over the longer timeframes that are needed for major research projects.
Ironically, the new Industry Minister Christopher Pyne was prepared to threaten this funding when he held the education portfolio in the Abbott government and sought to pressure the Senate to accept his higher education “reforms”.
But times have changed and Mr Pyne kept a straight face while standing alongside Malcolm Turnbull at the launch of the innovation statement this week.
Mr Turnbull argued that Australian business – and government – had to be prepared to take risks in order to make big gains.
“That’s why cultural change is so important,” he said. “We’ve got to be prepared to have a go and be more prepared to embrace risk and experimentation.”
Having written about the often unholy mix of politics and business during the 1980s, I am uneasy about giving blanket praise to “entrepreneurs”.
Labor has produced its own innovation plan and vigilance is needed to avoid wasting money on 21st-century snake oil merchants and carpetbaggers.
The ever-confident Mr Turnbull has no such inhibitions, arguing that the “more high-quality, effective, productive enterprising entrepreneurs we can attract, the better because they drive jobs”.
“If you start a new venture, a new business and it goes well for a while and then, for whatever reason, it doesn’t succeed, you may have lost some money, your investors may have lost some money, but the overall economy massively benefits because you are wiser, your employees are wiser, your investors are wiser, everyone’s learnt something and the ecosystem benefits.”
Indeed, the innovation statement argues that entrepreneurs often fail several times before they make it and learn much in the process.
“To help these entrepreneurs to succeed will require a cultural shift. We need to encourage Australians to take a risk, leave behind the fear of failure and be more innovative and ambitious.”
The statement recommends major changes to Australia’s bankruptcy laws. These would:
• reduce the current default bankruptcy period from three years to one year;
• introduce a “safe harbour” for directors from personal liability for insolvent trading if they appoint a restructuring adviser to develop a turnaround plan; and
• prevent other parties from terminating contracts while a company is restructuring, allowing it to keep trading through a temporary cash flow squeeze.
It is argued that Australia’s current insolvency laws put too much focus on “penalising and stigmatising business failure”.
Maybe so. But what about Australia’s problem with “phoenix companies”, where assets are transferred from an indebted company to a new entity to avoid paying creditors, tax or employee entitlements?
A report commissioned by the Fair Work Ombudsman estimated that phoenix companies cost up to $3.2 billion a year. Employees might be “wiser” after a company failure, but they are often poorer as well when they lose their accrued entitlements.
Going broke after “having a go” at innovation might not be a sin, but is a year’s bankruptcy long enough on the sidelines? Particularly for repeat offenders?
The innovation statement is also short on detail about what new investments will be eligible for a 20 per cent tax offset and what measures will stop potential rorting. And what is to stop rorting of special visas for entrepreneurs?
Mr Turnbull said the government had a “highly developed concept of the type of business we’re talking about”, but is still working on the final definition.
As he conceded: “It is important to make sure you get that right because often the devil is in the detail.”
Agreed. So, two cheers for the innovation statement’s direction and some good initiatives. But the third cheer will have to wait on those devilish details getting sorted.
Mark Skulley is a freelance journalist based in Melbourne. He was a reporter for The Australian Financial Review for almost 19 years, which included a decade covering national industrial relations and the world of work. View all of his columns here.