National Reform Summit Ensure Australia Remains An Innovative

How can we make Australia’s national system of innovation more efficient? The National Reform Summit, sponsored by KPMG, Australian Financial Review and KPMG, addressed this key question. Public policy has not been able to find the answer.

This question has been address in at least 60 reports over the last 15 years by the current Senate innovation system inquiry. This is a lot of reports with limited returns in terms of overall system coherence and innovation’s contribution to productivity and international competitiveness.

Although there are many examples of great success, these reports show a wider failure in policy setting and firm-level innovation capability. This is a list that’s all too familiar: failure to convert public research into commercial results, to generate higher levels business R&D, adapt and diffuse new technologies, and participate effectively in global value chain.

This is not just about public funding. According to the 2015-16 Budget tables, $9.7 billion will be provided by Australia for science, research, and innovation. It is deeper than that. The problem is deeper.

Commonwealth Innovation Funding Summit

The Commonwealth innovation funding is an aggregate of 120 line items of expenditure spread across 13 portfolios. More than half of the funding is dedicated to universities, medical research institutes, and public research agencies. Another 30% is allocated to businesses through R&D tax initiatives. However, there is not much funding available to support research collaboration between universities and businesses.

The Cooperative Research Centres program (CRC), for example, makes up 1.5% of total support to science, research, and innovation. Meanwhile, the Entrepreneurs’ Program, which recently restructure, accounts for 0.4%. Innovation Vouchers and other state-sponsor initiatives are also limit. It is not surprising that Australia ranks at the bottom in OECD rankings for collaboration in business-research.

The majority of Commonwealth funding for research and innovation, aside from R&D tax measures is directed at health, agriculture, and university funding programs. These schemes account for more than 30% of total funding. Environment accounts for the remainder. Manufacturing accounts for less than 6% and ICT is responsible for less than 4% of the funding. This is due to the low level business investment in university research, which is becoming more dependent on student fees income.

State And Territory Governments

This picture is similar for State and Territory governments but on a smaller scale. ABS estimates that these governments spent $1.28 billion on research in 2012-13. Nearly 35% of this was for health, and 40% for agriculture. We have less than 1% allocated to ICT and manufacturing. This is a poor preparation for a boom economy after mining.

The Productivity Commission was keen to draw attention to manufacturing subsidies, but not the relatively insignificant summit research expenditures in this area that could transform prospects through smart specialty in global markets. These expenditures are dwarf in part by tax concessions and subsidies for mining, insurance, and superannuation.

The science push and linear flow models for translating research into business applications have had some notable commercial successes in the biomedical and health sector. Examples include ResMed and Gardasil, Gardasil, Sirtex and Universal Biosensors. Mesoblast is another prominent example. However, the model can’t be extend to other areas where research adoption and application are more collaborative and interactive.

Supply-Side Of Research Summit

While the supply-side of research, especially publicly funded research will remain important for the development of a knowledge economy, it is essential that policy also focus on the demand side. This includes the absorptive capability of firms to be able access and invest in fundamental research. This will require a new approach for collaboration and long-term engagement in innovation ecosystems.

Collaboration is critical in exploring opportunities for the development and application of key enabling technologies, including nanotechnology, micro/nanoelectronics, semiconductors, advanced materials, photonics, analytics, artificial intelligence and design. Collaboration is key to achieving competitive advantage in global settings.


Firms More Likely To Massage Books

According to a study that was conducted firms jointly by Dutch and Australian researchers, accounting fraud is more prevalent in companies where the work culture encourages self-interest.

The anonymous survey surveyed 550 senior Dutch managers, mostly men, and found manipulations in everything from shifting funds between accounts to avoid overspending to delaying necessary spending.

Firms that were focused on their own success more than others were likely to have managers who received expensive performance incentives work contracts. This encouraged them to think about the effects of their actions on investors, shareholders and other employees.

Chair of Commerce Firms

Margaret Abernethy (Sir Douglas Copland Chair of Commerce at the Faculty of Business Economics at the University of Melbourne), Jan Bouwens and Laurence van Lent of CentER and Department of Accountancy, Tilburg University conducted the study.

Although the survey was conducted in The Netherlands, Professor Abernethy state that the problem is universal. There’s no reason for us to believe that our results don’t apply to managers or those in accounting and finance in Australia or other developed countries.

Julie Walker, Associate Professor of Accounting at University of Queensland, said that manipulation was likely just as common in Australia. The institutions of the two countries are not significantly different.

This is an important finding, because although we can affirm that accounting manipulation or earnings management is common, the study links that behavior to the culture of a firm rather than just looking at the economic stimulus for that behaviour in this instance the incentive contract. Professor Walker was not involve with the study.

Understand When Accounting

This is important because it allows us to understand. When accounting manipulations are most likely to occur, and how we can mitigate them.

Professor Abernethy stated that it was hard to change the work environment of a company’s ethical culture, but that a performance incentive contract could help mitigate some of the negative consequences of a self-centered approach.

Our study shows that ethical work environment in a company is strongly related to accounting manipulation incidents and the types of incentive agreements that firms choose to use.

Professor Bouwens stated that managers backgrounds were also important in how they perform their jobs. Managers with a certification-accountant background are less likely to manipulate accounts, all other things being equal.

This shows us that education and training can greatly reduce the chances of people engaging in unethical behavior. These programs teach accountants that it is in their best interests to not cross the line.

Study Had Implications Firms

Professor Abernethy stated that the study had implications on Boards of Management. Responsible for ensuring that firms embed cultural norms that promote ethical behaviour. This is important because it’s clear that the tone at the top can influence. The actions of employees within the company.

Professor Walker stated that getting rid of incentive contracts would only shift the problem and hide it. Senior managers often receive payoffs tied to firm performance, which can lead to poor earnings management. There is ample evidence to show that senior managers manipulate earnings to meet analyst forecasts.

This is a subtly distinct motivation from that provided by a performance incentive contract. The goal is to maintain the share price, not to maximize a performance bonus. Even if there are no performance-linked incentives, senior managers will still be assess on their financial performance.

I believe the key to solving the problem is the tone at the top, as the authors call it. It is clear that accounting manipulation can be reduce by good governance. This creates an open, transparent reporting environment and allows for greater monitoring of individual manager’s actions.


Government Postpones Aid Target, But Ramps Up Aid

As part of the 2012 Federal Budget, the government delayed its target for foreign aid by one year. However, it announced a series of new measures to monitor Australia’s aid programs. Stephen Howes, Director at ANU’s Development Policy Centre, spoke to The Conversation about the future Australian aid.

You could argue that this budget was weak in scaling up the aid program, but very effective overall. It is important to consider both the dimensions and both the quality and quantity of aid programs. In terms of the numbers, the government has pressed the pause button on the aid-to-Gross-National-Income ratio, which it had been increasing and had committed to increase to 0.5 by 2015.

They’ve maintained that level at 0.35 for this year. They have also increased the target of 0.0.5 by about $300 million this year, which is a slight increase in real growth. The target was pushed back and it will still be difficult to achieve even after the one-year delay. This is because you need to increase your aid budget by an average of $1 billion each year to reach the 0.5 target.

The Aid Target

It remains to see how serious the government really is about the aid target. And it remains to also be seen if the opposition will accept this delayed commitment. The agreement reached between the two main parties was one of the positive aspects of the previous commitment.

The budget contains a lot of useful material, which I believe is a good indicator of the budget’s effectiveness. Many of the responses to the aid review were included in the budget. We know that they have released the four-year strategy, although it will take time to review those documents and do a thorough assessment.

The government has now released a strategy to increase the assistance program’s scale. We don’t get to 0.5, but we do get to 2015-16.

The results framework was also published by the government, which allows us to try to hold the aid program responsible for its failures. It’s hard to judge whether the program is succeeding or failing if we don’t know what it’s trying.

A committee for independent evaluation was also establish by the government. This committee is an independent, senior body that will oversee AusAID’s evaluations. It will also ensure independence and quality. This is a significant reform.

Related To Effectiveness

Two other remarkable features are related to effectiveness. The first is that the majority of this year’s increase was through global programs rather than country programmes around 60% of that $300,000,000 increase. This means that there are significant increases in non-governmental organisations and multilateral organizations such as the Asian Development Bank or some UN agencies.

This is something that the aid review recommended. I believe it makes more sense for Australia than to try to do everything all by itself to invest in other organizations. We have limited resources, so we must work with others, especially as we scale up. This is a good thing.

However, the Latin America allocation did not increase, but it did not decrease. According to the aid review, we should stop providing assistance to Latin America

The aid review had recommend that the country aid to Africa maintain at a constant level. However, there has been a rapid expansion of the aid program. Rapid expansion of Africa’s aid program does not indicate sufficient consolidation.

Overall, however, the budget seems to be a significant step forward in the effectiveness agenda. Although we should see more effective aid from the budget, it is not as much as we would like or as the government has previously committed to.