Senate committee wants government to step up manufacturing R&D and skills support

The Senate Economics References Committee has released the report on its inquiry into Australia's manufacturing industry, outlining it sees clear opportunities for government to provide additional R&D and commercialisation support for Australia's manufacturing industry, as well as provisions that can help address the industry's skills shortage.

The delivery of the report by the Labor-led Senate inquiry follows a number of requests for extension. The reporting date was initially planned for November 24 but was then pushed back to December 17 followed by January 27. Committee chair and Labor Senator Anthony Chisolm then requested for another extension to February 4, before finally delivering it on Monday.

The committee said in the report [PDF] that while Australia's R&D performance has "some bright spots", there is still insufficient support and emphasis when it comes to a national approach to R&D, commercialisation, and investment.

"It is clear from the evidence that collaboration needs to be improved both domestically and with international partners to develop the innovation and scale necessary for Australia to realise the benefits from its R&D activities," the committee stated.

"These connections need to be built between federal and state governments, higher education institutions, research organisations, manufacturing businesses and organisations, investors, and skills and training organisations. This includes encouraging international collaboration, advanced manufacturing R&D, commercialisation, investment, and support for manufacturing modernisation to improve international competitiveness."

Off the back of these comments, the committee recommended the Australian government consider periodically reviewing R&D, commercialisation, and investment incentives and tax arrangements, such as the R&D Tax Incentive, while also expanding investment in growth centres and cooperative research centres to improve collaboration between training institutions and industry.

Establishing a Manufacturing Industry Fund that can provide co-investment incentives to the manufacturing industry with the private sector, and a separate Research Translation Fund to fund large projects that encourage R&D and the commercialisation of products, services, and processes were also put forward by the committee.

The committee added it wanted a working program with industry representation to be stood up to support the design and implementation of a "patent box" scheme.

These recommendations were among 19 the Senate committee outlined in the report.

During the inquiry, the committee also examined the manufacturing sector from a skills perspective and concluded that are "clearly serious deficiencies in Australia's skills and training -- in particular in Australia's vocational education and training (VET) sector".

"These must be addressed as a matter of urgency with particular regard to improved collaboration between the skills and training sector and industry," the committee continued.

It also labelled the current level of support for apprentices as "inadequate" and "insufficient", and recommended the federal government take on initiatives such as providing higher wages for apprentices who take up and complete apprenticeships, and collaborate with the university sector to encourage more industrial PhDs.

"Manufacturing worldwide has entered a period of transformation. The rapid development of computing power and internet connectivity are changing what is being manufactured and how that manufacturing is done," the committee said.

"While this may very well be disruptive, it generates new opportunities for Australian industry. It is encouraging that the Australian government recognised this opportunity through the Testlabs initiative and its agreement with Germany.

"There does, however, appear to be much further work to do as this fourth industrial revolution is still in its relative infancy. In particular, further consideration to training and skills needs to be made."

In the report, the committee also said there is scope for government at all levels to support the Australian manufacturing sector through the introduction of coordinated procurement policies.

The report also contained a dissenting report by Liberal Senators Paul Scarr and Andrew Bragg who argued that the majority of proposals made by the committee "would underpin a government-driven interventionist approach in the manufacturing sector".

"Such policies have not worked in the past and there is no evidence to suggest that they will work in the future. The danger is that they will distort the market and cause more harm than good," they said.

Instead, they suggest the federal government should continue with its existing policies that they claim are designed to drive productivity, pointing to examples like the $2.2 billion University Research Commercialisation Action Plan, Entrepreneurs Programme, and Business Research and Innovation Initiative.

Just last week, Prime Minister Scott Morrison announced AU$2 billion worth of initiatives focused on commercialising research with a specific emphasis on "six manufacturing priority areas", including resources and critical minerals, food and beverage, medical products, recycling and clean energy, defence and space.

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