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Keynote address to the Australia-Israel Chamber of Commerce (AICC) Business Lunch

Israel

15 December 2015

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Thank you for that introduction, and thank you to the Australia–Israel Chamber of Commerce for hosting me here today.

I’m delighted to be here. And may I also offer you my sincere thanks for the hospitality that’s been shown to us during this visit.

This is my seventh visit to Israel. My first was in 1994 as a 26 year old when I came with the Australian Union of Jewish Students.

And last year I had the privielge of leading the Australian Delegation of the Australia Israel United Kingdom Leadership Dialogue and have been a member of that delegation at each of its meetings.

Through those times, and through my many connections to supporters of Israel in Australia, I have developed great affection and admiration for this country and your ideals. I have learned a great deal about how you work, live and innovate.

This visit continues that learning curve and helps forge, I trust, even deeper links between our nations. For me, it has already proved to be highly productive in both senses.

I’ve had valuable discussions with many people about issues of direct concern to my portfolio.

I have spoken with Prime Minister Benjamin Netanyahu. I’ve had discussions with Chief Scientist Avi Hasson, whom I had the opportunity to meet last month during his visit to Australia.

We discussed many issues in our bilateral relationship, from economic matters to the potential for a future treaty on science and technology cooperation.

We also discussed the finalisation of an Industrial Research and Development Treaty as soon as possible.  What this signifies is a determination of Australia and Israel to collaborate on innovation.

The Chief Scientist and I have signed a declaration of collaboration on innovation and science that reflects this deep and ongoing commitment.

These discussions provided insights for my subsequent talks at Hebrew University and my meetings with venture capital entrepreneurs and startup experts.

These and other engagements that are scheduled before I leave Israel are a great opportunity to share ideas about matters high on Australia’s national agenda.

Issues of science and industry collaboration.

Of research and development.

Of commercialisation of research.

And of innovation and entreprenership.

We recognise Israel as a nation with one of the world’s highest concentrations of these attributes.

We have much to learn from you. I have no doubt this will continue to be a key theme in Australia–Israel bilateral relations in the years ahead.

Australia–Israel relationship

Our recent exchange of visits are invaluable. Not least because they reaffirm Australia's longstanding friendship with Israel.

Our two countries enjoy a strong and deep relationship grounded in our  commitment to freedom, democracy and the rule of law.

Our shared history goes back to Israel’s establishment. It goes to the settlement of tens of thousands of Jewish refugees and Holocaust surviors in Australia.

Today, Australia has a strong and vibrant Jewish community. Its members make an enormous contribution to Australian society.

This has been instrumental in promoting, sustaining and strengthening the bonds of friendship between our countries.

Our diplomatic relations go back all the way to 1949.

Our strong people-to-people links do the same.

But our most important bond is our bond of shared values. Our mutual and historic commitment to liberal democarcy, respect for human life and freedom from opression.

Israel and Australia have stood shoulder to shoulder through thick and thin.

The Government of which I am a member is commited to this relationship – now and forever.

And these shared values have led to collaborations between our two countries.

I'm pleased to report that our research collaborations between our world-class universities have intensified.

And, of course, business-to-business contacts continue to grow.

Australia has a healthy commercial relationship with Israel. You are an important export market for Australia’s energy and agricultural commodities.

There is much scope for us to build on that.

There is potential, for example, for Australia to export its technical expertise in exploration—particularly in the oil and gas sector, a relatively new industry for Israel but one where Australia is very strong.

By the same token, the potential for Australian companies to take advantage of Israel’s knowledge-based, technologically advanced economy is enormous.

This is especially the case in the areas of biotechnology, in information and communication technology, and in education and training.

We in Australia have watched Israel’s rise from an economy primarily based on agriculture and a traditional manufacturing sector, to a technologically advanced nation. It has been nothing short of meteoric.

Israel is now a hub of innovation.

You have a flourishing ICT-based economy.

It is shaped by a sophisticated system of major global investors, startups and universities engaged in industry research.

So as an innovation pacesetter, you have valuable lessons for the rest of us.

We want to know more about how you achieved this remarkable rate of success in commercialising innovation.

How you routinely turn bright research ideas into viable commercial outcomes.

How your industries, researchers and universities collaborate so successfully.

And what policy settings enabled a competitive and dynamic high-tech sector to evolve so spectacularly in this country.

That is why we are here. I have read the landmark book on this—Startup Nation and met Saul Singer to talk about it, but it’s even better to be here and meet the people that made, and continue to make it happen.

It’s why, under a new $US26 million Global Innovation Strategy, the Australian Government will be supporting Australian consortia of businesses and researchers looking to collaborate with Israel and other economies globally on research.

As part of this initiative Australia will establish five new landing pads for Australian entrepreneurs in other countries around our region and in innovation hot spots around the world.

Today I am delighted to announce that Australia, through Austrade, will enhance its engagement with Israel by establishing the first landing pad here in Tel Aviv to give Australian startups and entrepreneurs an edge in building innovation by working with Israel.

The landing pad will be a collaboration between the Australian and Israeli Governments—and Israeli venture capital networks, entrepreneurs, investors and researchers.

This new landing pad will help Australian entrepreneurs find their feet here, make local connections, and quickly link in to your vibrant startup and innovation ecosystem.

It will build on our support for Australian researchers and small-to-medium enterprises in developing projects with counterparts from Israel, as well as other innovative nations.

An economy in transition

I spoke about our shared history through migration, the settlement of Holocaust survivors, and the creation of Israel.

There’s something else we have in common: our industrial history.

Like Israel, Australia’s economy was once primarily agrarian. We rode on the sheep’s back.

While agriculture remained important when those days declined, and remains so today, manufacturing evolved to surpass agriculture.

The reign of manufacturing continued for decades, becoming the mainstay of the economy and supporting a large proportion of our nation’s jobs.

Manufacturing remains important to the Australian economy and its innovation system.

In 2013–14, manufacturing businesses contributed $US3.5 billion to the nation’s spending on research and development, the largest contribution of all industries.

The sector still employs around 900,000 people.

Australia continues to have a strong economy—one of the best in the OECD—as we approach our 22nd consecutive year of economic growth.

But it faces an increasingly challenging global environment.  

Australian businesses producing undifferentiated products, competing solely on cost, have become unsustainable in Australia, as is the case in many advanced industrialised countries.

A new model of manufacturing is evolving— higher value, knowledge intensive manufacturing—and we are working to give it the best chance of success.

Fortunately,  at a time when, as in Israel, traditional manufacturing was struggling in Australia, Australia experienced a boom in its mining sector.

Some $US290 billion in mining projects were initiated in a little over a decade—from 2003 to 2014—and this increased the prosperity of Australians significantly.

At its peak in 2012, the boom accounted for an unprecedented 19 per cent of GDP.

Now we have come off that peak. The boom couldn’t defy the law of gravity forever.

We are now in the production phase of the boom, which will continue to benefit Australia for many years to come, but we are not waiting for the end of it.

We are not taking any chances.

We’ve turned our attention to future sources of growth and prosperity—and the evidence points to productivity and innovation as the best source.

Why productivity?

If I may quote Nobel Economics Prize Laureate Paul Krugman on this:

Productivity isn’t everything, but in the long run it is almost everything. A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker.

So if productivity is the answer, what is the best way to increase it?

Evidence compiled by my department in its annual Australian Innovation System Report and our national data collection agency, the Australian Bureau of Statistics, says it all.

It is Innovation that holds the key to productivity growth and increased prosperity.

State of Australia’s innovation system

That Australia’s future prosperity lies in innovation is a fact that can’t be ignored.

The Australian Government is paying close attention to this.

We’re determined to transform Australia into an agile, innovative 21st century economy and are keen to learn from innovation leaders like you, in Israel.

Australia has the fundamentals for a strong innovation economy.

We have robust national science and research infrastructure.

Our universities and public science agencies conduct world-leading research.

Some of this research has led to important innovation breakthroughs that continue to benefit millions of people around the world. But much of it has remained on the bench.

In 2015–16, the Australian Government is investing some $US7 billion in science, research and innovation annually. This is above the OECD average as a percentage of GDP.

Despite this, we are not translating our publicly funded research as much as we could into commercial outcomes.

One of the main reasons is that our researchers and industry are simply not collaborating enough. Not enough knowledge is being transferred between them.

There are other hurdles.

In the business sector, for example, access to the right skills is limited. Finance, particularly early-stage finance, is constrained. These are the top two most commonly reported barriers to innovation.

National Innovation and Science Agenda

Last week our Prime Minister and I unveilved a blueprint for building a more innovative and entrepreneurial economy.

It is the National Innovation and Science Agenda.

It will change the way Australians work together to shape our future as a nation. We want to go from a mining boom to an ideas boom.

The one inexhaustible resource we have is the brainpower and imagination of our people.  Israel has harnessed this, and I want Australia to do that too.

We are investing $US800 million to drive smart ideas that create local jobs and global success.

This is an investment that will help us embed science, technology, engineering and mathematics into our national fabric.

The agenda begins with a cultural shift to encourage more Australians to take a risk on smart ideas.

Cultural change

The Government knows Australians have many smart ideas—be they because of our world‑class research or simply from traditional Australian ingenuity.

However, those who try to turn a smart idea into a great business often struggle to access capital in the early stages, when they need it most.

This affects our standing in venture capital funding and innovation in the OECD. And it kills ideas.

Australia invests in new and follow-on venture capital at $US8 per person compared with Israel at $US83 per person and the United States at $US70 per person.

The National Innovation and Science Agenda will help us improve our standing.

Our vision is for Australians to embrace risks - to get Australian investors to back these ideas at an early stage and learn from their mistakes.

We are providing tax incentives to encourage investors to direct their capital towards supporting high-growth, innovative startups.

This includes a 20 per cent non-refundable income tax offset and a 10-year capital gains tax exemption for investments in innovative ventures held for three years.

We are also doubling the cap on the fund size for early stage venture capital limited partnerships to $US145 million, with partners in new funds to benefit from a 10 per cent non refundable tax offset on capital invested.

We are relaxing our insolvency laws to take the pressure off Australians who go into ventures and fail.

We know many entrepreneurs fail several times before they succeed and they learn a lot from failure.

The current default bankruptcy period will be reduced from three years to one year to encourage entrepreneurs to take risk and put the lessons learned from failure to good use.

We are also reforming employee share schemes to make it easier for new small firms to hire and retain high-calibre staff.

For innovative startups that need coaching and support, a new $US7.2 million Incubator Support Program will help them turn their ideas into new products and services.

Australia’s world-class science agencies and universities are repositories of a wealth of leading-edge research waiting to be tapped.

CSIRO, the Australian Nuclear Science and Technology Organisation, the Australian Institute of Marine Science, Geoscience Australia and the National Measurement Institute all operate at the cutting edge of scientific research.

We are investing $US145 million in a new CSIRO Innovation Fund to support the early stage commercialisation of innovations from CSIRO, our flagship research agency, as well as universities and other publicly funded research bodies.

We are also keen to see Australia advance its strong position as a world leader in health and medical research.

A new $US180 million Biomedical Translation Fund will boost the capital available for commercialising Australia’s biomedical research and ensure we make the most of our great potential there.

Collaboration

Australia has great industries and researchers, but they tend to go their seperate ways.

The rate of collaboration between the two sectors is sadly, the lowest in the OECD.

The agenda will encourage our world-class researchers and great business people to collaborate more to shape our future industries and generate wealth.

The Government is shifting the focus of research funding for universities so a greater proportion of the research block grant funding they receive is directed towards research undertaken in collaboration with industry.

Critical research infrastructure initiatives such as the Australian Synchrotron, the Square Kilometre Array and the National Collaborative Research Infrastructure Scheme are important avenues for research collaboration.

To ensure they stay that way, the Government will set aside $US 1.6 billion for the next ten years to provide them with funding certainty and encourage greater collaboration with the business community.

We will also expand the highly successful Research Connections program and open the Australian Research Council Linkage Projects to fast-tracked continuous applications on collaborative research grants.

These will be in addition to the enhanced international collaboration we will pursue through our Global Innovation Strategy which, as I mentioned earlier, will support the establishment of five landing pads, one in Tel Aviv and four in other innovation-intensive locations around the world, including Silicon Valley.

Skills and talent

People remain our greatest asset. Often said, I know, but it is a particular and enduring reality for Australia that its people are naturally resilient, resourceful and courageous as a way of life.

The Australian Government is very much aware that Australians must also be agile and skilled enough to innovate as a way of life.

Through the National Innovation and Science Agenda, the Government will invest over $US29 million to stimulate interest in science, technology, engineering and maths among students from their earliest ages.

We will also invest over $US36 million in equipping our young people with the computing skills they need to succeed in 21st century jobs.

All Year 5 and 7 students will have the chance to learn computer coding through online challenges, building on the work we’ve done to fund coding in primary schools.

Teachers will get the support they need to implement our world-class Digital Technologies Curriculum.

They will be able to upgrade their digital skills through online learning activties and get support from experts, including scientists and ICT professionals, right in their classrooms.

Women will have greater opportunities to study and work in science, technology, engineering and maths fields through an $US8.6 million investment dedicated to encouraging their participation in these fields.

In addition to buiding talent domestically, we are seeking to create an environment that attracts the world’s best and brightest to Australia.

A new Entrepreneur Visa will be introduced to help us attract more talented entrepreneurs and researchers from offshore.

We will also improve pathways to permanent residence for postgraduate research graduates with STEM and ICT qualifications.

Students pursuing PhD and Master’s degrees by research in these fields will be awarded extra points under the Points Tested Skilled Migration program to strengthen their pathway to permanent residence.

We are making quantum computing an important focus. The Government will invest over $US18 million to turn the Centre for Quantum Computation and Communications Technology’s research into a silicon quantum integrated circuit.

Within days of this announcement the Commonwealth Bank and Telstra pledged US$8 million each to turn the initial investment into a $US 34 million injection of funds.

This will pave the way for developing a practical quantum computing system in Australia.

One of the Government’s digital goals is to see Australia become a global leader in cyber security.

We will establish an industry led Cyber Security Growth Centre that will help us achieve this goal.

Government to lead by example

The Australian Government will play its part under the National Innovation and Science Agenda.

We will practice what we preach by embracing innovation.

Our public service will be challenged to become more innovative in how it delivers government services.

We will increase the sharing of non-sensitive data with the public.

Governments hold an extraordinary amount of unique information that can help create new and innovative products and business models by the private sector.

We will also make it easier for innovative small and medium firms to sell technology services to government, including helping them bid and win a share of the over $US3.6 billion the Australian Government spends on ICT.

We will support Data61, a program to put Australian industry and government at the cutting edge of digital and cyber security technology and capitalise on the emerging data-driven economy.

This will ensure Australia builds and maintains a world leading data science capability and can apply that capability to develop new technology-based industries, as well as transform existing ones.

Finally, to bring all the elements of the agenda together and ensure they are implemented effectively, a new Innovation and Science Cabinet Committee, to be chaired by the Prime Minister, will be created.

Concluding remarks

To quote the Prime Minister "there has never been a more exciting time to be an Australian."

Our investment in the National Innovation and Science Agenda is a very important one for the future of our nation.

It has great potential to be a real game changer for our economy.

But grounded as it must be in our own efforts, we will continue to look at world best practices for innovation—particularly to you in Israel, and across the globe.

We will continue to value the growing research ties between our universities. We will seek to exchange our knowledge in the interests of a future built on collaboration, ideas and progression.

But most of all we will continue to nourish the warm and close relationships that exist—whether people-to-people, enterprise-to-enterprise, institution-to institution or government-to-government. We will continue look to the things that unite our two countries, now and into the future.

Shalom.

Ends

Mr Pynes media:   0439 764 809, pynemedia [at] industry.gov.au
Department media:  media [at] industry.gov.au