Financial System Inquiry: Second Round Submission – Promoting Innovation

This second-round submission to the Financial System Inquiry responds to the Inquiry’s interim report and focuses on the role of Australia’s financial system in supporting innovation arising from health and medical research, in both the private and public sectors. Research Australia maintains that Australia’s record in commercialising research is weak by international standards, citing the National Survey of Research Commercialisation finding of 0.3 start-up companies per US$100 million of research spending, compared with 1.1 in the United States and 2.8 in the United Kingdom, and Australian Bureau of Statistics data showing a lack of funds was a barrier to innovation for 20% of businesses. It recommends that facilitating innovation be recognised as a key function of the financial system and a guiding principle for government regulation, that venture capital receive special consideration in policy and tax settings, and that the Australian Government partner with venture capital investors to establish sector funds. The Medical Research Commercialisation Fund is presented as a case study, having invested about $7.5 million in Fibrotech for a return of about $75 million. The submission also supports longer investment horizons for superannuation, endorses Philanthropy Australia’s submission, and makes the case for social impact bonds to fund the trials and pilots needed to implement non-commercial health interventions, using a bowel cancer screening program in South Australia as an example.