Australasian Science: Australia's authority on science since 1938

Super-Seeded Science

By Anna-Maria Arabia

The increase in compulsory superannuation contributions provides an opportunity to commercialise our research efforts.

You wouldn’t be blamed for being cynical when the science sector sought the support of the growing $1.4 trillion superannuation industry to turn good ideas into national wealth. It turns out that a dialogue between the science and superannuation sectors was smart and forward-looking.

Australia has always been stronger at performing research than translating it into products and services. This is not surprising given that the incentives and measures of research success are academic in nature. Time spent filing patents, working with industry, advising governments or spinning off companies is time away from publishing papers in the top journals. The Australian research funding system not only provides a disincentive to engage in entrepreneurial activities, but it actively punishes the effort.

There is a pressing need to restructure funding arrangements to encourage translation in a way that does not jeopardise basic discovery. Not a trivial task, but not impossible. Israel has built its national prosperity on innovation and maintains a strong research effort, with publication and citation rates being among the best in the OECD.

So for a nation overachieves in terms of scientific output, why is Australia underachieving when it comes to driving innovation and creating a prosperous knowledge economy?

Former Queensland Premier Peter Beattie argues that unless Australian corporates take on the commercialisation of Australian innovation, we will remain the innovation mine for the world. He’s right. Business-as-usual means great Australian discoveries will continue to produce products, jobs and wealth for other countries.

The increase in compulsory superannuation contributions from 9% to 12% provides a unique window of opportunity to improve investment in science and innovation. Australia has the fourth largest superannuation pool in the world. When we reach 12%, funds under management will be in the order of $6 trillion, placing us first in the world.

Every fund manager should be concerned about maintaining diverse industries in Australia as investment targets. The industries of Australia’s future, like advanced manufacturing, are born from R&D efforts.

Another reason to support the development of such industries is so that banking and mining companies don’t continue to account for around half of ASX earnings. A diverse ASX investment strategy is essential for its long-term viability.

The performance of companies that lie outside the ASX200 is not routinely analysed by asset consultants because they are considered too small to be worth the effort. Yet it’s outside the ASX200 where many innovation investment options arise. This investment data gap could easily be filled, allowing fund managers to make informed investment decisions.

A second structural barrier to investment in innovation by fund managers is the absence of a mechanism that allows them to manage risk confidently. Let’s be clear: no superannuant, including scientists, would expect their contributions to be invested in a dud product with sub-standard returns.

The mining industry has overcome this barrier by creating an independent quality assurance mechanism. A similar model that measures quality and risk could be adopted for Australian innovation investment options.

Aside from structural barriers, investing more than 1% of the government’s $9.4 billion annual R&D spend in commercialisation would be strategic. Cultural barriers also need to be overcome to foster broad investor acceptance of innovation and deepen understanding of the innovation environment by asset consultants and investors.

But not all efforts lie with the superannuation sector. Science and innovation organisations and individuals need to be more commercially savvy and grow the pipeline of talented young scientists with a vibrant entrepreneurial culture and strong communication skills. Successful models such as the Medical Research Commercialisation Fund provide useful templates.

Superannuation investment in Australian science and innovation has the potential to lay the foundations for the future health and wealth of all Australians. It’s the place where Australian genius meets Australian wealth, and it doesn’t involve a single mine.

Anna-Maria Arabia is CEO of Science & Technology Australia.