2014 Pearcey Oration

29 August 2014 Melbourne

The 2014 Pearcey Oration as delivered By Senator Kate Lundy on the 29th August 2014 at the 2014 iAwards Lunch hosted by Ms Kathy Coultas, Vic Gov, at the Melbourne Convention Centre.

Senator Kate LundySenator Kate Lundy

Ladies and Gentlemen

It is an honour to have this opportunity to deliver the 2014 Pearcey Oration.

Dr Trevor Pearcey, as you know, was an Australian pioneer in computing. Like many Australian technology pioneers, over his career he worked for the Commonwealth Science & Industrial Research, collaborated with prestigious universities, was employed in the private sector, published papers and became the first Dean of Computing at what is now Monash University.

Like many pioneers, he possessed a strong vision for a future. In 1948 he foresaw ‘……an automatic encyclopaedic service operated through the national teleprinter or telephone system…’ 1948. Think about that.

And like many pioneers, he harboured a frustration that Australia did not leverage his early success to the fullest extent. Today I will seek to honour Dr Trevor Pearcey’s legacy by sharing with you my thoughts on Australia’s potential. How can we avoid perpetuating the frustration Trevor Pearcey felt by leveraging our current successes, strengths and potential in technological development and innovation?

VISION

I think you need to start with a vision for where you want to be. In this global environment of change and opportunity, I have a vision for Australia. It is informed by my belief that Australia has the people, the education system, the institutional architecture, the entrepreneurial spirit, the socio-political environment and the multicultural sensibility to be the best in the world in discovering, developing and applying technological solutions and remedies to solve the problems facing humanity and the environment we occupy.

My vision is this:

  • For Australia to have a fair, civil, healthy, engaged and educated society that values and leverages its cultural diversity to build both social cohesion and global engagement; and for this society to be supported by a diverse, digitally enabled economy that is growing sustainably through investment in education, creativity, research, collaboration, commercialisation, innovation, entrepreneurialism and export growth.

Within this, I firmly believe that with forethought and a commitment to the public good, it is Australia’s capacity to create and innovate with technology that will determine whether we reach our potential.

And it’s this potential I want to discuss today.

Like many of you, I don’t believe in mediocrity in public policy. If we do something, let’s do it properly. This is the spirit of the Pearcey Medal and its many recipients to date. These people have made a substantive difference to our world. The list is impressive and I pay my respects to Pearcey Medallists here today.

I also believe in the mostly unrecognised heroism of the quiet, devoted scientists, the noisy, creative entrepreneurs, the inspired, committed teachers and the dedicated, informed policy advocates. This means I believe in all of you, and what you have to offer our system: our system of democracy, of public engagement and our system of policy development. It’s the area of public policy development that I would like to focus on today.

POLICY

First of all, if you think that public policy has nothing to do with the private sector or vice versa, you may as well clean out your inbox because nothing I say from here on in will make any sense to you.

Let me set the scene:

  • Nation states, be it Australia or any other country, determine their national social and economic priorities, based on some universal values, some political philosophy, the evidence at hand and at times, partisan interests.
  • Governments set about making policy decisions to implement these priorities and they shape the status of and confidence in all sectors, public and private. The priorities are impacted by global events, like political unrest, conflict, socio-political trends, science, like climate change, and of course by economic cycles, such as the Global Financial Crisis.
  • The debate around the worthiness of both the philosophies and the policy priorities that give them effect is what I am immersed in every day. It is what you see parlayed around the traditional and social media morning, noon and night in what is now a very short media cycle.
  • The question of how policy is influenced, expressed, analysed and ultimately, decided is an immensely important question for people who care about good policy or in other words, people who care about Australia’s future.

You are forgiven if you think this system is hopelessly chaotic, ridiculously ill-informed, brutally arrogant and, evoking Dr Trevor Pearcey: incredibly frustrating! Particularly so when words and actions are inconsistent: As US Vice President said recently “ “Don't tell me what you value, show me your budget, and I'll tell you what you value.”

However policies informed by a positive vision for our nation are rarely a response to a reactionary political debate. Policies of substance are shaped from a long way out are informed by the collective values of civil society and draw on actual evidence and experiences.

PHILOSOPHY

So let’s start at the top. Central to my thinking about exerting a positive influence is the need to have a grip on the philosophies that inform a government’s policies. With the prevailing narrative about evidence-based policies, it’s overlooked surprisingly often. Keep in mind there is not necessarily a philosophical consideration for everything, and the fact modern political parties can be pretty hard to decipher philosophically anyway. I think having an insight into the current thought leadership and exploring what synergies exist with your sector’s interests is a useful place to start. Creating a constructive competition for policy is certainly a win for the cause. Just what these are is discoverable by an analysis of the existing policy landscape. There is a great deal of merit in devoting effort around a few themes that capture the imagination of the government of the day in addition to your key strategies.

FINDING COMMON GROUND

There are many issues that have political fault lines dividing them: new and old, some predictable, some just weird and disappointing. But there are always issues, such as growing the economy, that for the major political parties, it’s a question of who can do it better! As I said, the issue of fixing the market failure at the very early stage for start-ups fits comfortably within any modern government’s philosophical scope. Going through an exercise to explore other policies for which the prevailing dynamic is “We can do that better than them” helps find the areas for which a constructive, competitive, political advocacy can emerge.

ENTREPRENEURS

Here is one that may fit the brief: very early stage capital investment. Subsidy programs in this space are being wound right back. Using the evidence of the market failing at this early capital stage, another review was initiated by the previous government with the aim of fixing mistakes and targeting just the right tax incentives to get angel funding moving into start-ups.

This review has continued under the new government. http://www.treasury.gov.au/ConsultationsandReviews/Consultations/2014/Employee-Share-Schemes-and-Startups

An enormous amount of work and advocacy has made the case that this will help start-ups get to the next stage of securing debt equity or later stage venture capital. A related challenge is the tax liability on equity in start-ups which acts as a disincentive for entrepreneurs: why be liable for a tax bill on unrealisable capital gains from equity holdings when overseas you’re not?

The Government’s new Entrepreneurs Infrastructure Program replaces pretty much all of the previous governments programs and implies an emphasis on strengthening the entrepreneurial opportunities that exist within our economy so I am quite eager to see how this will look in actual outcomes. $484.2 million Entrepreneurs’ Infrastructure Programme will be delivered through the new Single Business Service initiative. In May of this year, Treasury provided this update: Issues raised in submissions to this consultation process are being considered within the context of the Prime Minister’s Taskforce established to develop a National Industry Investment and Competitiveness Agenda, which is due to make recommendations to the Government by mid 2014. Note too that it has a phased implementation, with the Commercialisation flagged for a November 2014 announcement. It’s a big challenge, given the pre-election Treasury paper offered costings that appear to make any change far too expensive. However the treasury paper did not disaggregate the costs relating to a change in the taxation treatment of larger Employee Share Schemes with those being foreshadowed for start-ups. We still don’t have that figure.

And even if we did, Treasury chooses not to use anticipated taxation revenue to offset the cost to budget of any new tax concession measure. Whilst ever this is the case, there is little hope. Surely there is a way to model, to phase in and to test the increased revenue. Only then can we get a true cost, and perhaps even a revenue positive projection for the measure.

This central question of why we invest in anything to grow a better future sits at the core of much of contemporary political debate. And there is no consistency. Without being partisan, the political landscape is crowded with both examples and hypocrisy. One party’s investment in the future is another’s waste and vice versa. Nonetheless, tax concessions that stimulate economic activity remain a legitimate part of the landscape. Negative gearing is a case in point in the housing sector. The R&D tax incentive is one this sector is very familiar with.

There’s the wine equalisation tax. Why is it so hard to design one for the small business start-up?

  • It’s a policy that could drive ethical entrepreneurial behaviour, if designed well;
  • It’s a policy that front end loads an ailing VC sector, strengthening the pull-through factor and opportunities for latter stage funding;
  • It’s a policy that leverages the public investment in R&D by facilitating its commercialisation;
  • A policy that fuels the growth of women and men starting their own small business;
  • A policy that acknowledges and celebrates the entrepreneurial spirit that is essential to growing economies;
  • A policy that the more successful it is, the more revenue will be raised, through corporate and income taxation;and finally,
  • it’s a policy that allows the market to decide where to invest.

To me this is an issue that fits comfortably within the any modern government’s philosophical scope. Policies that drive entrepreneurial activity leading to real businesses with cash flow and employees will be crucial the health of our economy.

The evidence is there, and the decisions are there to be made. I know I had great difficulty convincing my colleagues of the merits of this policy. In a party whose commitment to progressive tax structures is rightly worn as a badge of honour, it was a hard sell. However I was optimistic given the forecast flow on effect in our economy when it was implemented successfully.

It’s a policy that has broad bipartisan support and the debate should be about the detail, not about whether or not we need to stimulate early stage investment using tax incentives.

The philosophical hurdle that needs to be genuinely surmounted is that it is OK for private wealth to be generated from public sector investment in research and development. Entrepreneurial activity has always been essential to our economic growth: we talk about small business being the engine room, our business migration programs are all about stimulating it, women are the fastest growing cohort of small business start-ups.

CULTURAL CRINGE

It is damaging to Australia that we still have the cultural cringe towards the idea of generating wealth from an idea. The broad acknowledgment of small business as the engine room of our economy, and increasing recognition of entrepreneurs and their successful start-ups and businesses is improving but the substantive policy shift to optimise our economy for this kind of activity is yet to occur.

Celebrating success is a key part of this and engaging political leaders in this process essential. To this end the collaboration between Pearcey, ACS and AIIA that led to the iAwards is a fantastic example of this. The strong engagement with regional and global awards enables us to see how good we are when compared with the rest of the world. And yet I think it is well understood in this room today that helping our public R&D budget be part of an economic food chain that results in thriving, job-creating, preferably export-dollar earning businesses is a challenge.

It is a challenge that has exercised the minds of vice chancellors of all our universities, including those with large research budgets. It is also a challenge that in no way diminishes the value for pure research. The challenge is this: a system, some would argue a better system, is needed to increase the commercialisation of inventions and innovative processes here in Australia. It’s been described by various governments, and I am being provocative here: as improving the employment ROI on our research dollar; loosening the grip the Universities have on the research budget; allowing our institutions to recover costs by licensing IP; leveraging our institutional smarts for economic growth.

It doesn’t really matter the political nuance of the thought, it all means the essentially the same thing. We need to promote the creation of new businesses on the back of great ideas as part of our tertiary education offering in an ethical, thorough and systemic way. Our institutions need to embrace a cultural shift and the barriers have to come down.

I mentioned earlier that I believe there is a great deal of merit in devoting effort around a few themes that capture the imagination of the government of the day in addition to your key strategies. I think making these systemic changes to build an entrepreneurial culture in and through our tertiary and research institutions in one such theme. But there is still the question of the underlying strategy.

ADVOCACY

In my experience, the single biggest weakness in ICT advocacy is the lack of a clear vision with a central, united strategy. This vision could be a straightforward as answering this question: What are the five best policies that will achieve the systemic changes to our society and systems to harness and promote technological change for the betterment of society. You decide. The lack of a clear vision makes it difficult to have a united voice that sits above all of the intra-sector conflicts, issues and tensions. I’ve spoken before about the times when the largest corporate members of the peaks have happily traded the big picture in pursuit of their own interests. Rarely has it been the start-up and SME agendas that dominate, and yet arguably it is this part of the sector that offers the most with resilient, sustainable jobs and growth. I also think the intellectual rigour of the sector’s advocacy needs a stronger structure than the collaboration of peak bodies, with due respect, all of whom have a charter which requires servicing member’s needs. A worthy charter for sure, but the next level is required. With a number of institutions surviving if not thriving, the missing links are the clear vision, and an independent, uniting voice that is not conflicted by its constituent parts.

INSTITUTIONAL ARCHITECTURE: PRIDE

The closest I have seen to this end in the proposal for the Pearcey Research Institute for the Digital Economy. The executive summary makes the point that the Institute: “…ties in, integrates and leverages work undertaken in a sporadic, fragmented, disconnected manner by over 20 separate institutions (…) who between them, have released over 250 reports in this area in the last 10 years, most of which have sunk without trace or impact. As a well-respected, independent, rigorous and inclusive institution, the role of PRIDE is to make relevant data available, stimulate debate, and encourage interpretation and strategy formulation.” Apart from being tad harsh of the previous papers, I think this is a good idea.

Provided it is genuinely independent and can it be built to genuinely strengthen the collaborative networks that many of you have invested in with your time, energy and intellect, like NICTA, CSIRO, IBES, ADFI, Universities and CRC’s.

And can it help halt the decline in participation by women that is a serious black mark on the sector.

And will it be a united voice for the sector, supported universally by the industry and their peaks.

First and foremost this idea needs to be developed and the proposal cites the need for $100,000 to conduct a detailed feasibility study and development of a business plan for the Institute. I am in parliament, but not government so I can’t predict the chances of this funding request being successful. But I wouldn’t sit around waiting for an answer. As a bit of a left field idea, can I humbly suggest to Pearcey Foundation members that you explore the contemporary technique commonly referred to as ‘crowdsourcing’ as a means of raising your initial seed funds. For such an important initiative I believe it’s a great way to build a community of interest in your initiative.

Crowdsourcing means everyone has a little bit of skin in the game and creates collective ownership through a wonderful model of social entrepreneurship which is on the rise throughout the world.

CONCLUSION

In conclusion, my key message here today is one of building solid foundations to the voice of your exceptional sector. It is technology that offers the most promising pathways to improving multifactor productivity and therefore global competitiveness.

I have been fixated on the role of technology all my life and I have long been able to rationalise constructing my vision for Australia around all that technology offers. So can you.

You have heard me say often that it is your sector and all that you do that will provide Australia’s greatest social and economic opportunities for the 21st century. I want to congratulation the Pearcey Foundation for their vision for an ICT Economic Think Tank. With its charter to create a practical plan to leverage our nascent strengths in technological development for economic expansion and job creation is urgently required.

It strengthens the collaboration across the sector witnessed here at today’s event and the celebration of excellence this evening.

Despite a chronic disillusionment being the central meme of political conversations of late, there is at the heart of most political endeavour the desire to progress society in a positive way. This optimism needs to prevail, especially when your campaign is, by its very nature, a positive one that seeks to build on strengths, create jobs, grow new and better Australian businesses.

Assume the best of those you approach in your advocacy, and more than likely they will offer the best of themselves.

Thank you.


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