Australia climbs innovation ranking despite global slowdown

2013 was a good year for innovation in Australia, according to the Global Innovation Index 2014, released today, with the country climbing two places from last year's results, to rest at number 17 in the world, above New Zealand's ranking at 18, and below South Korea, in 16th place.

This is the seventh annual Global Innovation Index, prepared in advanced of the G20 Leaders Summit in Queensland later this year, and it looks at how economies around the world support innovation and investment. It also emphasises the key role that policy-related factors, such as human capital — the key theme of this year's index — are playing in driving innovation.

Australia's ranking this year is up from its ranking in 2013 — which was based on 2012 figures. According to the index, Australia was ranked in the top spot globally in trade and competition, while being ranked 7th for tertiary education and 8th for research and development.

However, according to the index, Australia's weak variables include cultural and creative services exports (ranked 52nd in the world), and national feature films produced (49th), while the country's strengths were in global entertainment and media output (3rd) as well as printing and publishing output (5th), the report said.

The index report said that as of 2013, a fall in the growth of public research and development (R&D) support coupled with the continued hesitancy of company R&D expenditure seemed to lead to slower overall growth of total R&D expenditures worldwide; this was the case in especially high income countries, such as Australia.

Meanwhile, in many advanced countries, fiscal consolidation also seems to have negatively affected public spending on education since 2010.

The index places much of Australia's improvement in its global innovation status on venture capital grants from the government.

"The effects of the government's new venture capital grants are evident in the improvement of the number if venture capital deals entered into, an indicator that shows an improvement of three places — from 26th to 23rd place," the index said.

However, much of the index's data was collected prior to the federal government's 2014 Budget, which cut spending from at least eight programs aimed at supporting venture capital projects, innovation, and research.

While Australia once again ranked overall in the top 20 countries worldwide, it did not fare as well in the index's 'efficiency ratio' figures — which show how much innovation output a given country is getting for its innovation inputs. This is based on the index's findings that Australia was ranked 10th globally for innovation input, but 22nd in the world for innovation output.

According to the index, Australia's efficiency ratio was 0.70, ranking the country at 81, beneath Ukraine, ranked 14, Zimbabwe at 48, Uruguay at 75, and New Zealand, in 66th place with an efficiency ratio of 0.75. However, this is an improvement on last year, when Australia was ranked 116th according to its efficiency ratio.

Ian Macfarlane, Federal Minister for Industry, said that this one area that Australia would need to work on.

"As the 2014 Index has shown, there are challenges to overcome," said McFarlane, at a media conference in Sydney today. "We need to do more to improve the output side of our innovation activities. That's why the Australian government is keen not only to create an enabling environment for engineering ingenuity to flourish, but also to strengthen connections between science, research and industry.

"We must define and promote our priority areas for economic growth, and underpin them with structural reforms that align investment with support from innovation," he said. "As we're doing this, the Prime Minister's task force has developed a national industry investment and competitiveness agenda, which will be released shortly, which will focus on ways to build on Australia's strengths, create jobs, and exploit our competitive advantages."

Macfarlane's comments come only two months after the federal government slashed AU$845.6 million in budgetary support for programs aimed at fostering innovation and commercialisation, including Commercialisation Australia and the Innovation Investment Fund, both of which were on the chopping block.

Instead, Treasurer, Joe Hocky, revealed the government would spend AU$484.2 million on its new Entrepreneurs' Infrastructure Program — which McFarlane said would also help to foster research and innovation in Australia.

"In our recent budget we announced the investment of AU$484 million in a new Entrepreneurs' Infrastructure Program to help turn our people's ingenuity and good ideas into great market outcomes," he said. "This funding will give access to researchers and innovators to re-engineer business operations, products, ideas, and service, providing a springboard for the next wave of entrepreneurship in new-age industries."

According to the index, progressive government policies designed to foster innovation will be essential for sustained global growth.

"If indeed future-oriented policies aimed at stimulating innovation and new sources of growth are not widely pursued, hopes for sustained global growth could be dashed," said the Index report's executive summary.

Referring to Australia's number four ranking in the index within the Asia Pacific region, McFarlane said that this was partially driven by the country's strengths in information and communication technology, along with general infrastructure.

The index also revealed that Australia was not the only country to suffer the effects of a technology innovation 'brain drain', with research showing that close to 75 percent of migrant inventors from low- and middle-income countries reside in the US, while China and India stand out as the two largest middle-income countries of origin, followed by Russia, Turkey, Iran, Romania, and Mexico.

According to the report, leading researchers and entrepreneurs are more likely to pursue their careers in the USA or the UK.

It said that the migration of innovators from developing to developed countries is also evident in statistics on inventions, where it has been shown that inventors in developed countries such as the USA are more likely to be immigrants than natives.

For the fourth year in a row, Switzerland came first in the index, with the United Kingdom in second place, Sweden in third, the United States in sixth, and Singapore in seventh place.