Overview
2.1
Businesses require investment to scale up, enter new markets, diversify their products, and operate innovatively and competitively. Investment in Australian industries may come from domestic sources or internationally. Co-investment arrangements, taxation policy and tax incentives may offer further opportunities to generate investment and grow industry sectors.
2.2
A strong and stable intellectual property system also underpins investment decisions. The medicine and pharmaceutical industry and entertainment industry are two examples where intellectual property issues support investment growth and export opportunities.
2.3
Innovation can stimulate investment, and vice versa. Innovation can be supported through international collaborative research projects, tax incentives for research and development (R&D), and targeted research funding. A visa system which enables businesses to attract global talent can also foster innovation and support investment.
2.4
Supporting small businesses, start-ups and entrepreneurs to grow their businesses into export markets can generate new and innovative ideas and products. Small businesses may require additional support to enter export markets and attract investment, however, as they generally have less resources, capital and international market information than that of larger businesses.
Incentives to export and invest
Foreign investment
2.5
Australia is a ‘net capital importing country’. The Business Council of Australia (BCA) stated that this was due to Australia’s relatively small population, which has meant it ‘has never been able to finance all worthwhile investments that can be made in [its] economy.’ As such, foreign investment was described as ‘essential’ to the economy, particularly as it brings ‘capital, skills and technologies to Australia.’ The Department of Foreign Affairs and Trade (DFAT) and the Australian Trade and Investment Commission (Austrade) highlighted that they were ‘focused on ensuring Australia remains a competitive destination for foreign investment.’
2.6
The impact of investment on an Australian industry was demonstrated by the Australian Sugar Milling Council (ASMC). The ASMC explained that investment in its industry had been used to enhance existing operations, finance new ventures, improve infrastructure, open up new export opportunities, stimulate innovation, and build confidence in the sugar industry. The ASMC further highlighted that this investment ‘has played an important role in underpinning regional economies with a flow on effect to the Australian economy as a whole.’
2.7
DFAT and Austrade outlined that foreign investor feedback regarding Australia’s foreign investment settings often focussed on:
The desire for regulatory efficiencies and harmonisation; and
Concern about policy that may increase the perception of sovereign risk.
2.8
Regulatory harmonisation is particularly important for investors operating across state and territory borders. DFAT and Austrade noted that cost burdens can be created through having to comply with different regulatory requirements across jurisdictions, such as in the areas of ‘technical standards, safety, training, workforce qualifications and quality assurance.’
2.9
Maintaining the overall stability of Australia’s foreign investment policy framework was described as critical in ensuring Australia remains an attractive investment destination. The BCA further explained that having a ‘consistent, coherent, stable and predictable policy framework’ for investment includes:
… lowering barriers to investment through trade agreements, having clear and consistent investment screening policies and a competitive tax system. It would also minimise concerns around regulatory or country risk that can arise in the eyes of global investors and firms seeking to do business in Australia.
2.10
In a similar vein, the Australian Investment Council (AIC) recommended against the Australian Government making any ‘unnecessary changes that would restrict future foreign investment into Australian private capital funds or businesses.’ The Infant Nutrition Council (INC) also cautioned against tightening of foreign investment settings, to ensure foreign investment continues to support the infant formula industry in Australia.
2.11
DFAT and Austrade acknowledged that that ‘certainty, transparency and predictability’ were important factors in foreign investment policy. DFAT and Austrade outlined that the Australian Government had ‘streamlined its foreign investment review process by simplifying aspects of the regulations and the fee framework.’
2.12
The BCA further stated that if ‘Australia has concerns around investment from certain types of organisations or in certain sectors, these should be made clear’ to investors. To address this issue, the BCA recommended that the government ‘ensure there are clear and consistent investment screening policies with timely decision making’ in place.
2.13
DFAT and Austrade outlined how national security considerations are taken into account when reviewing foreign investment proposals and stated:
The Government considers the national interest when reviewing foreign investment proposals on a case-by-case basis. If it is ultimately determined that a proposal is contrary to the national interest, it will not be approved, or conditions will be applied to safeguard the national interest.
2.14
DFAT also stated that many of Australia’s Free Trade Agreements (FTAs) have ‘liberalised [Australia’s] foreign investment screening thresholds for private investors in non-sensitive sectors.’
Superannuation
2.15
In addition to supporting foreign investment, the AIC stated that Australia has ‘to do better to incentivise … domestic capital.’ The AIC cautioned, however, that there ‘are some structural design features of [Australia’s] system that increasingly make that difficult.’
2.16
The AIC outlined a range of reasons why superannuation funds may not be investing in Australia’s private capital investment industry. These included ‘tax inefficiencies’, including that Australia does not have a ‘limited partnership collective investment vehicle’, which is ‘a flow-through fund structure that is simpler to understand and less compliance intensive than some of our existing vehicles here in Australia, and, importantly, it is the same type of vehicle that is used offshore.’
2.17
The AIC also explained that, as superannuation funds are becoming larger, so too are their investments, and this may not suit many businesses in the Australian market. The AIC stated that Australia has:
… a very large [superannuation] system with huge amounts of capital that is growing day by day, and we also have a push on the part of government, certainly, and regulators, in particular, for consolidation in the superannuation industry—for less funds ultimately managing larger amounts of capital. What that does mean is that those funds, out of commercial necessity more than anything, have to invest ever increasing amounts of capital in one transaction. We refer to it as bigger and bigger cheques … and for a large part of the Australian business sector, which might be looking to attract capital through an industry like ours, they are too big.
2.18
The Red Meat Advisory Council (RMAC) similarly commented that Australian superannuation funds had been ’reluctant’ to invest in agriculture, due to ‘issues of investable scale, liquidity, risk-return tolerance and experience.’
Co-investment
2.19
The AIC recommended the Australian Government consider government equity co-investment programs, which ‘attract private capital into a sector of the economy which otherwise would not attract adequate investment.’ The AIC outlined that this had been achieved with the $500 million Biomedical Translation Fund (BTF), which ‘provides companies with venture capital through licensed private sector fund managers’ to help companies develop ‘biomedical discoveries into tangible products, services and outcomes.’ The AIC stated:
Already, the money that was raised [through the BTF] is beginning to be deployed into ground-breaking life science companies … Importantly, the government is not trying to pick winners at the individual company level but rather, back proven funds that can raise matching capital from the private sector.
2.20
The Greater Whitsunday Alliance (GWA) and the Regional Development Australia - Mackay Isaac Whitsunday (RDA-MIW) similarly considered that co-investment could support businesses and projects in its region. The GWA and RDA-MIW recommended:
… co-investment from government and industry sectors to identify and support catalytic projects that support investment attraction to the MIW region and specific service and product suppliers.
2.21
The Advanced Manufacturing Growth Centre (AMGC) cited a lack of access to capital as a key barrier to Australia’s advanced manufacturing sector building capability in exports. To help address this issue, the AMGC explained that it has co-invested in the development of advanced manufacturing concepts into commercially viable products.
Investment in agriculture
2.22
RMAC considered that both foreign and domestic investment should be generated for the agricultural sector. In relation to foreign investment, RMAC recommended that the Australian Government conduct a review of the Foreign Investment Review Board framework, including thresholds.’ At the same time, RMAC acknowledged that the ‘knock-back rate’ by the Foreign Investment Review Board was ‘not high’ under current arrangements.
2.23
To support domestic investment, RMAC recommended the Australian Government consider ‘the creation of a sovereign wealth fund for Australian agriculture.’ RMAC stated that this would help address the lack of ‘domestic institutional capital and sovereign support compared to other leading agricultural nations.’
Box 2.1: International approaches to investment
The AIC highlighted Scotland and Singapore as two jurisdictions which have implemented measures aimed at securing greater business investment.
In Scotland, the AIC pointed to the Scottish Investment Bank, which was ‘set up in order to help companies identify appropriate sources of finance, engage with funders and secure … investment.’ The AIC also highlighted Scotland’s SME Holding Fund, which ‘seeks to address the problems of access to finance specifically for [small to medium sized enterprises (SMEs)] with growth and export potential.’
The AIC also drew attention to Singapore’s government agency Enterprise Singapore, which ‘works towards growing Singapore as a hub for global trading and start-ups … as well as helping Singaporean companies internationalise.’ The AIC described the approach of Enterprise Singapore and stated that it:
… takes a business-centric approach to its services based on a company’s stage of growth, the industry in which it operates, and the overseas markets of interest. The tailor-made approach to helping businesses is applied across some features of Enterprise Singapore’s offering to companies that are looking to break out into new markets, such as its matching of companies with the right business partners in other markets and specialised tax advisory services.
The Singapore Economic Development Board was also highlighted by the AIC. The AIC stated that this entity:
Attracts inbound investment;
Works to position Singapore as a ‘global centre for business, innovation and talent’; and
Manages ‘grants and tax incentives for global businesses that are seeking to establish themselves in Singapore.’
Taxation and tax incentives
2.24
The BCA described Australia’s tax arrangements as ‘outdated’. In particular, the BCA stated that the company tax rate was ‘uncompetitive’ and may deter global investment. The BCA put forward the following reform actions to ‘make Australia a more competitive investment destination’:
‘broad-based, comprehensive tax reform’, or if this is not possible, ‘the company tax rate should be reduced to 25 per cent for all companies’;
if a company tax cut is not implemented, ‘the federal government should introduce a broad-based, investment allowance applicable to all investment depreciable under current tax law’; and
the continued progression of tax integrity reforms internationally.
2.25
The AIC also raised concerns that Australia’s ‘current legal and tax framework deters foreign investment’, and that it ‘necessitates duplicate and complex structures.’ To make Australia more competitive, the AIC put forward recommendations related to:
tax incentives to stimulate corporate investment in early stage companies;
incentives for investors and government entities to engage with start-ups and SMEs;
‘promoting open data initiatives’;
‘opening up the Accelerating Commercialisation program to venture capital-backed companies’; and
‘reforming equity incentive rules for founders and entrepreneurs who hold a significant equity stake in their company.’
2.26
Representatives from a range of industry sectors drew attention to tax incentives and other taxation measures to stimulate investment. RMAC, for example, outlined the impact of taxation arrangements on investment in red meat and stated:
Taxation is a key factor influencing domestic and foreign investment in Australia. The red meat supply chain touches every aspect of the tax system. Investment in the red meat sector, and agriculture more broadly, is necessary to ensure the long-term sustainability of rural industries and communities. It follows that our taxation policies should support the attraction of this investment.
2.27
RMAC recommended the government consider an ‘agribusiness specific taxation reform agenda.’ Measures put forward as part of this agenda related to investment; state and territory taxes; risk mitigation; temporary residents; Goods and Services Tax; business structures; succession planning; superannuation; environment; transport; and water.
2.28
Australian Performance Vehicles (APV) emphasised that federal, state and territory governments should focus on minimising costs to industry, so that Australian businesses can be globally competitive. In particular, APV recommended that state governments minimise payroll tax, to enable innovating and growing companies to employ a range of skilled professionals and still remain profitable.
2.29
In addition to broad scale reform, measures aimed at attracting investment to specific industries were also highlighted by inquiry participants. These included:
Technology manufacturing: Atlassian stated that tax incentives could assist with enhancing innovation in advanced technology manufacturing.
Video game development: the Interactive Games and Entertainment Association (IGEA) called for a 30 per cent refundable tax offset for video game development (similar to the 30 per cent rebate available to the Post, Digital and Visual Effects sector), to stimulate growth of the local industry and also attract international investment.
Film and television production: Ausfilm recommended the government permanently ‘increase the Location Offset from 16.5 per cent to a rebate of 30 per cent on expenditure in Australia on location filming’, to encourage large international productions to Australia. Ausfilm stated that since the Location Offset temporarily increased in 2018 through the Location Incentive program to an equivalent 30 per cent rebate, it had ‘generated about $900 million in actual or forthcoming expenditure in Australia’, with a cost to government of approximately $270 million.
In contrast, Screen Producers Australia (SPA) considered that a greater focus should be on improving the Australian television production offset in order to attract greater international investment in local content.As such, SPA recommended the incentive for local television creation be increased from 20 per cent, to be in line international competitors such as New Zealand (which is closer to 40 per cent). SPA also recommended streaming services be required to invest ten percent of revenue earned in Australia into Australian content and promotion.
Intellectual property
2.30
The Productivity Commission (PC) stated that intellectual property (IP) arrangements (such as patents, copyright, trademarks, and others) ‘offer opportunities to creators of new and valuable knowledge to secure sufficient returns to motivate their initial endeavour or investment.’
2.31
The Australian Chamber of Commerce and Industry highlighted ‘costs and uncertainty around the protection of IP’ as a potential barrier to businesses accessing export opportunities.
2.32
Stakeholders from the medicine and pharmaceutical industry and the entertainment industry highlighted IP regulatory barriers that may be a disincentive to investment. These are outlined below.
Medicine and pharmaceutical industry
2.33
Medicines Australia emphasised the importance of a ‘strong, stable and predictable’ IP system for stimulating investment and innovation in the medicines industry. Reflecting this, Medicines Australia recommended the Australian Government ‘ensure Australia’s [IP] regime is globally competitive.’ In addition, Medicines Australia recommended ensuring that Australia’s IP system ‘recognises and rewards our niche strengths in research and advanced manufacturing and is consistent with international IP norms’.
2.34
Bristol-Myers Squibb (BMS) similarly drew attention to the importance of a ‘predictable and effective IP environment.’ BMS was concerned, however, that:
Punitive policies and uncertainties associated with Australia’s current IP system are hampering the ability of both local and multinational companies to maximise their potential contributions to the Australian community.
2.35
In particular, both BMS and Medicines Australia highlighted Regulatory Data Protection (RDP) and patent notification as two areas for IP reform.
Regulatory Data Protection
2.36
Medicines Australia stated that RDP is a ‘key IP policy mechanism for the pharmaceutical industry.’ BMS further explained the importance of RDP to investment and stated:
Under [the Agreement on Trade-Related Aspects of IP] Article 39.3 each World Trade Organization member is required to protect undisclosed test and other data submitted for marketing approval in their country against disclosure and unfair commercial use. This RDP is to support the investment of time and resources needed to develop the required test data from unfair commercial use for a period of time. … Without the certainty of some substantial period of market exclusivity, innovators may not have the incentives needed to conduct the work to discover and bring new biologics to market.
2.37
BMS stated that Australia’s current RDP period of five years is not in line with its key global competitors and trade partners. BMS explained that the United States of America (US) ‘offers up to 12 years for biologics; the European Union (EU) up to 11 years; and Canada and Japan both offer eight years.’
2.38
Medicines Australia recommended that Australia’s RDP period be aligned to at least that of the EU. BMS similarly recommended Australia’s RDP be strengthened and aligned with global best practice, which would ‘enhance Australia’s ability to compete for foreign investments in the knowledge- and innovation-intensive biomedical sector’.
Patent notification
2.39
BMS and Medicines Australia outlined concerns about Australia’s policy and processes relating to potential patent infringements. Both groups also cautioned that Australia’s approach to patent notification may not be in line with its obligations under the Australia–US FTA (AUSFTA). BMS stated that:
… Australia has not implemented a system by which patent holders, as a matter of practice, receive advance notice of third-party applications for marketing approval of potentially patent-infringing pharmaceutical products. … As a result, originator pharmaceutical companies in Australia are routinely unaware of a potential infringing product until after the product has received marketing approval (and has been registered on the [Australian Register of Therapeutic Goods]). For originator companies with Pharmaceutical Benefits Scheme (PBS) listed products, the entry of a generic version of a medicine, irrespective of patent status, triggers mandatory and largely irreversible price cuts for the innovator product, in addition to the loss of market share.
2.40
BMS stated that the Australian Government’s approach to patent notification ‘undermines legal certainty, predictability and the incentive provided by patents to invest in new treatments and cures.’ Medicines Australia added that ‘in the absence of prior notice, patent holders are forced to pursue litigation in order to protect their IP rights’.
2.41
To address this, Medicines Australia recommended that the government ‘notify pharmaceutical patent holders in a timely manner when potentially patent-infringing generic or buyer similar products are seeking market entry thereby mitigating the need for innovators to go to court.’
2.42
The BMS similarly supported efforts to:
ensure a transparent equitable process with respect to publishing information on applications under evaluation by the [Therapeutic Goods Administration (TGA)] and alignment by the TGA with international best practice by other major health authorities; and
have a strong IP environment in Australia where Australia meets all of its obligations under AUSFTA and which attracts R&D investment into Australia.
2.43
Medicines Australia further stated that Australia's IP system is ‘being undermined by government policy seeking to recover damages from innovators when they protect their patents.’ Medicines Australia explained:
The Australian Government has persisted with a policy of seeking to recover damages from innovators in cases where challenges to patents on PBS-listed medicines have ultimately been upheld following an initial granting of a preliminary injunction. This policy creates significant uncertainty for pharmaceutical patent owners in Australia and undermines the rights of patent holders by introducing a strong disincentive to defend their IP.
2.44
Medicines Australia recommended the Australian Government cease pursuing damages in these instances.
Intellectual property and copyright in the entertainment industry
2.45
APRA AMCOS advised that Australia has an efficient copyright administration, which provides it with a ‘significant competitive advantage’ in the Asia Pacific region. APRA AMCOS outlined the benefits of Australia’s regulatory environment in relation to copyright and stated:
Australia enjoys a regulatory environment that facilitates legitimate use of copyright materials, where content is made available and rights owners are fairly compensated. Such a regulatory environment fosters investment in local creation and provides export opportunities for our creative industries, and for APRA AMCOS to develop multi territory digital licensing models.
2.46
APRA AMCOS stated that trade agreements have an important role in ‘promoting development and harmonisation in copyright laws and their enforcement, particularly in our Asia Pacific region.’ APRA AMCOS was supportive of recent FTAs that Australia had signed, and further stated that ‘the agreement with the EU may provide a higher level benchmark for copyright protection.’
2.47
APRA AMCOS also cautioned that the digital transformation of the music industry has led to new regulatory considerations and ‘cross border licensing and enforcement’ issues, which may pose ‘significant potential barriers to entry and trade impediments.’
Research and development
2.48
Research is a critical part of Australia’s innovation capability which, in turn, drives Australia’s export growth. In particular, Universities Australia considered that that collaborative and adequately resourced university research allows Australia to ‘keep pace with the rest of the world’.
2.49
To support quality research, Universities Australia saw a greater role for the Australian Government in ‘specific funding for large-scale, long-term international collaboration’. According to Universities Australia, ‘modest government funding can often attract co‑investment from other partners and lead to significant research breakthroughs.’ Universities Australia further explained why government funding for international research collaboration was needed, and stated that:
… there is an important role for government in supporting international research collaboration more generally, and perhaps a bit more generously. In an increasingly global research environment, that kind of collaboration is not an add-on or an extra; it is an essential part of successful university research, research that is effective and has impact. And it is a necessary part of keeping up with a global research enterprise and making sure Australia is still at the forefront of global university research.
2.50
The Australian Government’s R&D Tax Incentive was highlighted as a mechanism to attract innovation and investment in Australian industries. The R&D Tax incentive is designed to help ‘offset some of the costs [a company] puts into eligible R&D.’
2.51
The AIC described the R&D Tax Incentive as a ‘critical element of the innovation and tax system’, and recommended it be maintained. The AIC further stated that:
The government should address recent uncertainty around the future settings of the scheme and a heavy-handed approach taken by the [Australian Tax Office] and Ausindustry in the auditing of previous years’ claims.
2.52
Medicines Australia also considered that the R&D Tax Incentive ‘should be stabilised and strengthened rather than being constantly tinkered with and weakened.’ Medicines Australia objected to proposed changes that would introduce an intensity threshold for industry, as this would diminish ‘Australia’s attractiveness as a destination for clinical research.’
2.53
The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) similarly called for ‘certainty’ in relation to the R&D Tax Incentive in order to support small business. ASBFEO stated:
When we looked at the research and development tax incentive … part of the problem here is a lack of certainty. In that instance, you get an incentive and you spend it on what you think are appropriate things, your R&D, and then it could be four years later that the tax office comes in and says, 'No, that wasn't right; now pay us back the money'—it's all spent. And, because small business is always on a knife's edge of a slender line of profit, that can wipe you out, and it does wipe you out.
2.54
The AMGC considered that the ‘parameters under which a company can obtain money under the R&D Tax Incentive program makes it challenging for some smaller entities to invest via that method.’
2.55
Increasing Australia’s R&D budget was put forward by Atlassian as a way to enhance ‘Australia’s capability as an innovation creator and technology manufacturer.’ In addition to increasing R&D funding, Atlassian stated that policy factors needed to be reviewed, including:
‘the definition/scope of what activities qualify as eligible for R&D access’ and
‘the definition of how innovation occurs and what the process of discovery is to this point.’
2.56
R&D was described by Medicines Australia as a major aspect of ensuring ongoing investment in the medicines industry:
The innovative medicines industry has developed some ground-breaking discoveries … However, medicines investment is high-risk with approximately only 12 per cent of medicines that enter clinical trials reaching approval for use by patients. Therefore, our industry is highly reliant on a stable policy environment that strongly supports innovation, research and development, and commercial translation to the same levels as competitor nations. Without these policies, there will be limited incentive for ongoing investment into Australia.
2.57
Medicines Australia called for ‘policy incentives and streamlined processes to attract direct and indirect investment in R&D and the avoidance of policies that detract from innovation.’ More specifically, Medicines Australia recommended the government support a policy environment that attracts investment to ‘priority areas’, which included medical research, such as ‘R&D tax incentives for clinical trials.’
Clinical trials
2.58
Medicines Australia stated that clinical trials conducted in Australia bring benefits to the economy and for patient access. BMS agreed and added that the technical and economic benefits associated with clinical trials leads to intense ‘global competition for clinical trial investment.’Australia’s advantages in attracting clinical trials include high quality health researchers and professionals, research infrastructure, a stable political and social environment, and high clinical and research standards.
2.59
Despite these advantages, Medicines Australia outlined barriers to the attraction of global clinical trials. These included complex arrangements for establishing trials and approval processes; lower recruitment rates and slow timelines; high costs; inconsistent processes between states and territories; and no coordinated long-term strategy.
2.60
To address these barriers, Medicines Australia recommended that: federal, state and territory governments agree to regulatory harmonisation; patient access to clinical trials be enhanced; and the Clinical Trial Notification scheme be retained.
2.61
BMS also considered that a ‘lack of harmonisation across commonwealth, state and territory governments’ was a barrier to clinical trials and R&D investment. To address this, BMS recommended a ‘national coordinating body responsible for clinical trials reform’ be established, under the auspices of the Council of Australian Governments.
2.62
The Committee recognises that the above evidence was received before the global COVID-19 pandemic, and that protocols on this issue will necessarily have to be reconsidered in the post-pandemic environment.
Visas
2.63
Fast and efficient visa processing times, particularly for recruiting skilled labour, can support investment and innovation. Conversely, visa delays can lead to missed business and investment opportunities and impact on business continuity. DFAT and Austrade added that certainty in visa settings is ‘vital for maintaining investor confidence.’
2.64
Visa processing times were highlighted by the Victorian Government as being a common concern for industry. In addition, the Victorian Government cautioned that it was aware of international businesses that had decided against investing in Australia due to ‘the difficult and lengthy visa processing barriers.’
2.65
The importance of supporting domestic employment and skill development was also raised. The Victorian Government emphasised that ‘migration policy and program settings must also balance the need to support domestic employment, education and training policies and ensure public confidence in the migration system.’
Attracting talent and innovation to Australia
2.66
Atlassian described a ‘lack of access to experienced, global talent’ as ‘the single biggest factor constraining the growth of the technology industry in Australia.’ Recognising the need for global talent, in 2018 the Australian Government established the Visas for Innovation initiative which includes:
The Global Talent Independent program, which ‘offers a streamlined, priority visa pathway for highly skilled and talented individuals to work and live permanently in Australia’;
The Global Talent Employer Sponsored (GTES) program, which ‘allows employers to sponsor overseas workers for highly-skilled niche positions that cannot be filled’ by Australians or other visa programs;
The Supporting Innovation in South Australia pilot, which is a ‘visa arrangement designed to attract foreign entrepreneurs to take forward innovative ideas and launch seed stage start-ups.’ If successful, it will be rolled out nationally.
2.67
The Victorian Government welcomed Visas for Innovation, while the AIC described the GTES program as an important step in boosting the pool of talent available to start-ups and scale-ups in Australia. Atlassian recommended the government ‘continue to enhance and bolster’ schemes that attract global talent to ensure Australia’s competitiveness.
2.68
The Victorian Government also encouraged ‘further state government involvement in reviewing and refining the Visas for Innovation initiatives,’, and added that it would support further reforms to ‘facilitate new talent, business and investment. In particular, the Victorian Government stated that it would:
… welcome early engagement with the Commonwealth regarding the potential rollout of the Supporting Innovation in South Australia pilot to Victoria, and the ability to modify the settings or implementation of this program as required.
2.69
The Victorian Government also highlighted the importance of having a ‘competitive and accessible entrepreneur visa’ to stimulate start-up activity and attract high growth businesses. The current visa available for entrepreneurial activities, however, was described as having ‘restrictive’ funding requirements, which was limiting interest in the visa. The Victorian Government recommended that ‘lowering the funding threshold, broadening funding sources and accepting endorsements as an alternative criterion would allow Australia to compete globally.’
2.70
The Victorian Government also stated that it:
‘… supports the establishment of a formal mechanism for states and territories to request priority processing of Employer Sponsored Visas for senior highly skilled individuals of a company tasked with establishing a significant business enterprise in Australia;’ and
‘… recommends that the Commonwealth undertake a comprehensive review of the Australian and New Zealand Standard Classification of Occupations to highlight new and emerging occupations and skills which need to be recognised and considered for skilled migration to Australia.’
2.71
Reflecting the need for expert and highly skilled staff in the development of medicines, Medicines Australia recommended the development of policies to support ‘talent exchange (including the ability to fast track visa approvals for mid-term inter-company transfers) within the pharmaceutical sector. Medicines Australia stated that this would bring expertise to Australia, and also enable Australians to work overseas and then ‘bring expertise home.’
2.72
DFAT and Austrade advised that investor feedback had highlighted a need for short term visas for new foreign investors, in order for them to set up their operations in Australia. DFAT and Austrade stated that ‘although a visitor visa permits “business activities” some investors have been refused a visa as these activities are deemed “work”.’
Visas and tourism
2.73
Tourism Australia stated that ‘visa competitiveness is … an extremely important factor’ for Australia’s tourism reputation and for increasing Australia’s share of the international tourism market. Tourism Australia further highlighted the importance of a streamlined visa processing system for attracting international visitors to Australia and stated:
An accessible, competitive and easy-to-use visa process is essential for maintaining and growing Australia’s market share in a cluttered global tourism market. Increasingly, consumers expect greater efficiency and have a lower tolerance for entry barriers and delays such as visa wait time. Furthermore, the cost of travel and ease of obtaining a visa are considered by prospective travellers as important factors when selecting a holiday destination.
2.74
Reflecting this importance, Tourism Australia supported the Australian Government’s efforts to ‘streamline visa applications, expedite processing times, [and] develop better visa products’. In terms of improvements to the visa system to encourage international visitation, Tourism Australia highlighted that visas that support repeat visitation were important. Tourism Australia stated that:
… one of the particular areas is the importance of repeat visitation to our tourism industry. This is anything to do with multi-entry visas, for example. What we found a few years ago, when we were able to introduce multi-entry visas within Indonesia and moved to a 10-year visa, is that they had very positive effects. … of course our marketing is around getting the first-time visitor, but, critically, it's about showing those visitors such a great time that they'll come back again.
2.75
The Victorian Government raised the visa requirements for visitors from many Latin American countries (including Brazil) as a barrier to tourism and trade. To address this, the Victorian Government recommended that:
‘…the Commonwealth review the barriers impeding greater trade, investment and tourism flows between Australia and Latin America;’ and
‘… Brazil be included in the list of countries eligible for access to transit without a visa.’
Visas and international education
2.76
Universities Australia emphasised the importance of ensuring ‘consistent and appropriate visa policy settings’ for students and academic staff. Universities Australia stated that this would help Australia to maintain a comparative advantage in the international education market.
2.77
The Department of Home Affairs stated that in 2018, it reviewed the Simplified Student Visa Framework (SSVF), which had commenced in July 2016. The Department of Home Affairs stated that ‘stakeholders confirmed that the SSVF is generally operating as intended and called for a period of stability in policy settings.’
2.78
The Victorian Government considered that federal regulatory and standards agencies should examine the impact of recent incentives for international students to study in regional Australia. The Victorian Government explained that this would ensure the incentives were beneficial and stated that:
… this [scrutiny] would help to ensure there are no unintended negative impacts in terms of unethical recruitment, low provider quality or lack of regional capacity to absorb an uplift in international students with regard to employment, accommodation, transport and student support services.
Visas and entertainment
2.79
APRA AMCOS stated that a major barrier to exporting Australian music to the US is ‘the difficulties and costs associated with petitioning an entertainment visa for artists to showcase and tour in the US.’ APRA AMCOS further noted that US artists faced similar difficulties when looking to tour Australia.
2.80
To address both these issues, APRA AMCOS recommended that:
… the Australian Government enter in to trade discussions with the US to introduce a reciprocal Music Exporters Provisional Visa that allows artists the opportunity to showcase and tour in each other’s countries on up to three occasions before they need to apply for a working permit.
Visas and services
2.81
BDO stated that Australia’s visa system was a significant barrier for businesses that trade in services. BDO explained that it was undertaking an amalgamation of its practices, which will have the effect of voiding current skilled work visas for its sponsored employees and lead to ‘approximately $300 000 in [Skilling Australians Fund] levy fees associated with reapplying for the skilled work visa for those employees on these visas.’
2.82
BDO recommended the Australian Government ‘develop actions to assist businesses in the service industry and help boost Australia’s exports’, including visa arrangements.
Supporting small, regional and start-up businesses
2.83
The Department of Industry, Innovation and Science (DIIS) outlined that while SMEs make up 99 per cent of Australian employing businesses, their contribution to exports is ‘disproportionately low.’ As such, DIIS considered that ‘assisting SMEs to export represents an important avenue to boost job creation and economic growth.’
2.84
The New South Wales Government quoted research which stated that SMEs face similar barriers to export as large businesses, but may not possess the resources to overcome them. Barriers included:
‘A lack of information about the international opportunities available to them;
A lack of capability and capacity to engage in international trade;
A lack of information on trade requirements, regulations and markets;
Relatively higher costs of complying with regulations - not just those imposed by overseas governments but also regulations in Australia;
Relatively higher transaction costs for doing business internationally; and
Inadequate access to trade finance for international opportunities.’
2.85
DIIS further outlined that the ‘inherently complex’ nature of FTAs means that SMEs can face more challenges in utilising them than larger businesses.
2.86
SPA discussed these challenges in the screen industry, as over 80 per cent of Australia’s screen industry is made up of SMEs. SPA stated that ‘these screen businesses require significant and often prohibitive sunk costs of time, resources and capital to build the skills, capabilities and overseas networks needed for export sales and co-productions.’
2.87
Initiatives that the Australian Government could implement to support exporters, including SMEs, were put forward by inquiry participants. These included:
Mentoring, including for new exporters and those in high growth and emerging industries;
An Austrade-run program to assist new or emerging exporters, with a focus on pitching and international partnerships;
A ‘start-up incubator’ to foster innovation (as has been used internationally);
Providing support through ‘partnerships, grants and procurement’ to SMEs and start-ups, or an ‘export accelerator grant program’;
Improving communication with SMEs, including through greater utilisation of digital tools, highlighting successful examples of SME exporters, and/or industry-specific education about export opportunities and how to enter specific markets.
2.88
Operating as an SME, APV had first-hand experience of barriers to export. In particular, APV stated that ‘it is difficult to obtain the resources or subject matter expertise to navigate through the export regulatory and investment landscape.’ To help mitigate this, APV stated that the government should establish policy settings to enable SMEs to be successful exporters and to grow from small into medium sized enterprises.
2.89
These policy settings could be based on collaboration between government and industry. APV gave the example of the defence sector, where the government has successfully assisted defence exporters through market intelligence, trade missions, export grants and business improvement programs. As such, APV stated that ‘there is significant merit in expanding the defence industry development programs and the collaborative networks … and applying this model more broadly across the Australian manufacturing export sector.’
2.90
Another SME, Geospatial Intelligence, considered that there needed to be greater utilisation of SMEs in Australia’s space sector, instead of primarily relying on government expertise. Geospatial Intelligence highlighted an approach to industry development in the US and noted:
In America, if private industry has a capability, then government doesn't do it; they go out to industry. And that's all we need to do in Australia. If there's a capability required by government or anybody in Australia, go out to Australian private industry first to see if they can meet that capability.
2.91
Geospatial Intelligence recommended the Australian Government consider outsourcing aspects of the development of the defence and space sectors to industry, instead of government departments.
2.92
Austrade highlighted support it had available specifically for scale-ups and start-ups looking to develop international markets. The Landing Pads program is located in Berlin, San Francisco, Shanghai, Singapore and Tel Aviv, and provides 90 day residences to businesses to ‘help them reach into new innovation ecosystems and seek finance or partnerships.’
Regional businesses
2.93
Regional businesses may face additional barriers to export and investment. DFAT and Austrade outlined government actions aimed at supporting regional businesses as including:
Austrade’s TradeStart network, which has locations across regional Australia and is delivered in partnership with state, territory and local governments, industry associations and chambers of commerce. TradeStart provides Australian businesses ‘direct access to a specialist advisor who can help them succeed in international markets.’
Collaboration between Austrade, the Department of Infrastructure, Regional Development and Cities and RDA committees on ‘viable investment opportunities.’
Growing the northern Australian economy through investment and support as part of the Government’s northern Australia agenda.
2.94
The GWA and RDA-MIW described the MIW region as ‘a powerhouse in terms of exports and trade’. To grow its regional economy and exports, the GWA and RDA-MIW put forward a range of recommendations. These included building market intelligence of trade and investment opportunities in the region; co‑investment from government and business into projects that could stimulate investment and exports; support for SMEs; and an examination of infrastructure needs to support increased productivity.
2.95
The GWA and RDA-MIW also saw benefit in exploring broader market trends across northern Australia, to identify common barriers and solutions to boost exports:
These cross regional collaborative actions would ideally focus toward shared export infrastructure, research and development, policy and regulations. The Australian Government in support of the Northern Australia Agenda could establish an [Office of Northern Australia] facilitated working group comprised of regional stakeholders and Northern Australia agencies to find policy and operational solutions in support of cross regional development solutions.
2.96
The AIC recommended the government launch a ‘Regional Innovation Fund’, which ‘would stimulate and support the establishment and growth of start-ups, new businesses and industry sectors – such as Agritech – to catalyse economic growth in regional and rural areas of Australia.’ IGEA put forward a similar recommendation and stated that the government could establish an innovation hub for video game development and other technology start-ups, which could be located in a regional centre.
Committee comment and recommendations
Investment
2.97
Foreign investment underpins a range of Australian industry sectors and is a major part of Australia’s economy. The Committee heard from certain sectors that certainty was paramount in foreign investment policy settings. Some inquiry participants also cautioned against any further tightening of foreign investment settings, although this must be balanced against the wider national interest, national security (including food security) concerns and public concern about foreign investment.
2.98
Domestic investment also supports Australia’s export sector. The Committee considers that there may be opportunities for greater domestic investment, particularly through superannuation, in Australian businesses and industries.
2.99
Co-investment initiatives, where the private sector partners with the government, provide opportunities for industry growth and innovation. Industries such as biomedicine and advanced manufacturing have benefited from co-investment initiatives, and there may be further opportunities for this type of investment into the future.
2.100
The Committee heard from a range of sectors about how tax incentives could be used to stimulate further growth in their industry. In particular, tax incentives for advanced manufacturing, video game development, and film and television production were put forward as mechanisms to attract investment. The Committee is of the view that targeted tax incentives can be an efficient way to generate investment and should be considered by the government, as well as being subject to a cost/benefit analysis.
2.101
The Committee recommends that the Australian Government identify new and emerging trade opportunities and seek to apply the lessons learned from the Biomedical Translation Fund to help attract industry investment to those opportunities, as part of an updated trade and investment strategy.
2.102
The Committee recommends that the Australian Government continue to progress its tax reform agenda, particularly by reducing the company tax rate, as a priority.
Intellectual property
2.103
The medicines and entertainment sectors highlighted to the Committee that a strong intellectual property (IP) system underpins investment, research and growth in these industries. Uncertainty relating to IP may be a barrier to investment and exports.
2.104
The medicine and pharmaceutical industry pointed to specific aspects of IP that may be hindering investment. These included Regulatory Data Protection and Patent Notification. The Committee was concerned to hear that these policy settings may be impacting on investment, and considers that the Australian Government should investigate them further.
2.105
The Committee recommends that the Australian Government, in collaboration with State and Territory Governments, the medical profession and pharmaceutical industry:
develop a unified national regulatory scheme for the establishment, conduct and reporting of clinical trials in Australia; and
review Australia’s intellectual property settings, particularly regulatory data protection and the patent notification scheme, to assess if they are an impediment to greater investment.
Research and Development
2.106
Research and Development (R&D) can generate innovation, growth and diversification across Australia’s economy. The Committee heard that there were industry concerns around the stability and utility of the Australian Government’s R&D Tax Incentive. In particular, the Committee was concerned that some inquiry participants stated that the R&D Tax Incentive had been ‘weakened’, while others stated that it was difficult for small businesses to engage with. Supporting the development of R&D in Australia is an important way the government can enable the continued growth of innovative industries, products, and business practices across the economy.
2.107
The Committee notes that the Senate Economics Legislation Committee is scheduled to report in August 2020 on its inquiry into provisions of the Treasury Laws Amendment (Research and Development Tax Incentive) Bill 2019.
2.108
The Committee recommends that the Australian Government investigate improvements that could be made to the Research and Development Tax Incentive, particularly to meet the needs of small and innovative businesses.
Visas
2.109
An effective and stable visa system is a critical aspect of attracting global talent to Australian industries and supporting investment. The Australian Government’s Visas for Innovation initiative is an important step in sourcing expertise and innovative thinking to Australia, particularly in industries such as advanced manufacturing.
2.110
Removing any unnecessary barriers in the visa system that relate to the education, tourism and entertainment industries can ensure that Australia can continue to succeed in these highly competitive global industries.
2.111
The Committee recommends that the Australian Government, in consultation with industry, review the Global Talent Employer Sponsored program after one year to assess its effectiveness, and make amendments to the program if necessary.
2.112
The Committee recommends that the Department of Foreign Affairs and Trade and the Department of Home Affairs work with the music industry to increase access for Australian performing artists to the United States of America market, including consideration of a reciprocal visa arrangement for artist tours and showcases in each other’s countries.
2.113
The Committee recommends that the Australian Government implement measures to enhance trade between Australia and Latin America, including consideration of visa requirements for Latin American visitors to Australia.
Small, regional and start-up businesses
2.114
Small to medium sized enterprises (SMEs) make up the vast majority of Australian employing businesses, but only a fraction of export value. While it is not feasible to expect all SMEs to export, it is important to ensure that SMEs have the capacity and support to enter export markets when opportunities arise. Supporting SMEs can also stimulate innovation, as it is often at the ‘start-up’ level where new ideas are discovered.
2.115
Specific barriers that SMEs may disproportionately experience include limited information and visibility of international opportunities; limited contacts and capabilities needed to engage in exports; relatively higher costs to engage in trade and comply with regulations and less access to finance opportunities available to larger companies.
2.116
The Committee was pleased to hear that the defence sector has had some success with government-industry collaboration to support exports, which has had positive outcomes for Australian defence businesses. There may be potential for other sectors and government agencies to learn from this example and apply it to other export industries.
2.117
The Committee recommends that the Australian Government consider further options to support small and medium enterprises to enter (and remain) in export markets, including:
Greater support targeting start-ups and entrepreneurs;
Consideration of current government support for small businesses in the defence export industry, and whether this support could be replicated in more broadly to other industries; and
Greater education and communication (including via digital means), particularly for new exporters, on how to enter and succeed in specific export markets.
2.118
The Committee recommends that the Australian Government establish a Superannuation Task Force to explore, develop and recommend structural changes and possible incentive based programs and regulations to increase the level of Australian superannuation fund investment in Australian industries, particularly those with an export focus.