The Gillard government has released its new industry policy blueprint and it looks reasonable enough. Although Business Spectator gives it a caning, more even-handed analysis is available from Peter Roberts at the AFR:
The extra $350 million to support innovation investment funds (IIFs) is a bold recognition that there remain market failures in our venture capital sector that are holding back new company formation and growth.
..Under the IIF scheme, the government provides $1 to private sector managers who match it with a dollar from private investors to create a venture capital portfolio.
The government takes a return on its capital only up to the long-term bond rate.
In this way, the government still earns a return, but its cash cuts the risk and increases the potential upside of venture capital, as any windfalls go straight to the private sector investors.
The government is even more clearly turning away from public sector solutions with the 10 new industry innovation precincts that are modelled on Germany’s highly successful Fraunhofer Institutes.
Australia’s national policies have long focused on boosting public sector research, and then “commercialising” their inventions, a so-called linear model of innovation.
These look like reasonable enough moves. Funding them from cuts to R&D tax breaks for bigger players is self-defeating of course.
But let’s face it, this is chicken feed.
We have an export and import competing structure that developed at a 75 cent dollar. We’ve lost over 30% of our competitiveness right there. For both exports and import competing businesses. From HSBC:
Adding a couple of $100 million to industry innovation support is just not going to cut it.
Our authorities should do exactly what the rest of the world is doing. Go to the G20 and join the chorus of indignity directed at currency manipulation, come home and drive down using every available tool. That is essentially what the recommendations of the Manufacturing Taskforce aimed at doing. If you think nothing can be done, ask yourself, why are we the only ones not doing it?
Then let the industry cards fall where they may.
