Draft Terms of Reference, Financial System Inquiry

This letter to the Head of Secretariat of the Financial System Inquiry comments on the Inquiry’s draft terms of reference. Research Australia maintains that the draft terms address innovation only within the financial system, not the system’s capacity to support innovation in the broader economy, and asks that they be amended to consider how the financial system can better support productive investment and innovation, and whether it is biased towards non-productive investment. It cites the National Survey of Research Commercialisation 2010 and 2011, which found only 0.3 Australian start-up companies formed per US$100 million of research spending, compared with 1.1 in the United States, 1.6 in Canada, 2.8 in the United Kingdom and 3.2 in Europe, and Australia’s ranking of 19th of 45 high-income economies in the 2013 Global Innovation Index. It notes the shallow Australian venture capital market and that Cochlear, CSL and ResMed did not rely mainly on the Australian financial system to grow.