Where is Australia's ambition?

'Building public support for science, engineering and technology' | Speech to The Australian Academy of Technology and Engineering | Broadcast 4 August 2021.

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President Professor Hugh Bradlow, CEO of ATSE Kylie Walker, Professor Lyn Beazley,?Professor Ian Chubb, Distinguished Professor Genevieve Bell, Ladies and gentlemen.

It is a privilege to begin by acknowledging the traditional custodians of the land on which we all stand today and I pay my respects to elders past, present and future.

I extend my respect to Aboriginal and Torres Strait Island people, the world’s most ancient continuous civilisation. Today, I am standing on Gadigal land of the Birrabirragal Nation.?It always was and always will be, Aboriginal land.?

I am honoured to be invited to join you and delighted to be in the company of so many accomplished scientists, technologists, engineers and mathematicians.?

Responding to crises

I have been back in Australia since 2018.?This has of course coincided with the Covid-19 pandemic and Australia’s remarkable phase 1 response.?It has been instructive to see Australia face a crisis and watch how it responds. The last major crisis I observed was the Global Financial Crisis of 2008.?

I recall the drumbeat in Australia beginning with a warning by Peter Costello in the lead up to the 2007 election where he said that: “a huge tsunami will go through world financial markets.”?I’m pretty sure very few Australians heard that message or what followed it: We “seemed to have forgotten that recessions every decade or so were the "normal" state of affairs. "It is almost as if people have become so used to growth that they think a recession can't happen in this country."

Almost 12 months later, in an interview with Kerry O’Brien, an unsettled Alan Kohler was trying to impress upon us the severity of the downturn he was tracking in global markets, and projected that the Aussie dollar might fall below 60 cents and possibly as low as the mid 50s. The response by the Rudd Government was swift with Treasury Secretary Ken Henry saying that we were ‘going early, going hard and going households’.?

I mention Australia’s response to the GFC because in global terms, it cushioned the economic blow and, it meant we did not have to rethink how we did things. Some would say, we squandered the opportunity to reform.?

As I reflect on what has worked in this response to the Covid-19 pandemic, there are many similarities to our response to the GFC.?While the first response was successful, it seems that yet again, our advantage wasn’t leveraged because of the lack of vaccines. It is as though we seem unable to string together enough plays to score a try. And enough tries to win a match.

A question of trust

I’m starting to ask myself whether we have lost our ambition and whether politics is trumping policy?

Looking at the Edelman Trust Barometer globally and here in Australia there are clear messages that are emerging.?Edelman reports that trust shifts up when leaders do what’s right. I want to draw your attention to the performance of scientists on this chart.

And I note that the community rates our academic experts and company technical experts highly. Australians are looking to the ATSE to give them accurate information on which they can rely to make good decisions.

The Edelman work also shows that Australians are not enamoured with the media.?Because they are seen as biased.?And the media companies and platforms are paying attention.?

Recently, Google, the owner of YouTube, took?action in Australia against SkyNews over what it regarded as a misinformation campaign and banned their broadcast for seven days.?This is remarkable.?

Australians want to understand what’s going on. They want to be informed.?The research indicates that because of the void left by those they once trusted, they’ve turned to their organisations, and specifically to their CEOs.

A shift from politics to policy

I made the point that policy, not politics, needs to enter our vernacular.

I took the opportunity during my interview with? Maria Bartiromo of Fox Business to raise this while we were discussing the importance of the Bipartisan Infrastructure Initiative being negotiated by President Biden. This bipartisan Bill brings the Republicans and the Democrats together, with the support of the Business Community to act in the best interest of the United States, for the first time since FDR. It sends a really strong signal to business and to society, that investing in better roads, better rails, bridges and fixing broadband is important as is investing in clean infrastructure, taking a pro-renewable stand, a pro-clean energy position, in a way that is not punitive to business.?This is something business can support.

The challenge for Australia

Now with almost a trillion dollars in debt and a more complex geopolitical environment in our region, a change in the buying behaviour of Australia’s biggest customer and rising competition from Africa in iron ore, Australia also has some difficult challenges to overcome.?

ATSE must begin to foster deeper and wider relationships with the business chambers, multinationals, think tanks, universities and government and make a persuasive case for change.

It must unlock the answers and insights available from the work of its researchers and make this available to inform debate and policy.?We all know that in the absence of this expertise, a vacuum is filled by those with opinion.?

We must transform Australia's economy

This is a comparative analysis of country performance from the Atlas of Economic Complexity published by Harvard University in 2018.?

That trend line is not one that this country can afford to continue to see. We started at rank 55 in 1995.?As at 2018 we ranked 87, below New Zealand, which is ranked 54th in the world.?The Economic Complexity Index is a ranking of countries based on the diversity and complexity of their export basket.?Economic complexity expresses the diversity and sophistication of the productive capabilities embedded in the exports of each country.

Let me be blunt, our trajectory confirms we have an economy that is not adding enough value to the products and services we export, and that we are not using the skills of our people effectively.

The level of complexity means that there is now a mismatch between what Australians can do and what the nation needs them to be able to do.?Employers are having difficulty filling jobs.?Unfortunately, the investment needed to train our workers is too slow.

Our decline coincides with an increase in exports of resources and agriculture to our northern neighbours.?

The over-reliance on one major customer that consumes 40% of our exports ended up weakening our resolve for reform. Despite these challenges, we remain among the top 10 wealthiest countries in the world, for now.

Introducing greater focus

Anyone who has read my book Make It In America: The Case for Re-Inventing the Economy will know that the United States suffered when it manufactured less in country.??President Obama invited me to work with him on re-building the nation’s manufacturing capability, for a modern time.?This took the form of 11 sectoral hubs specialising in a specific technology or industry vertical and encouraged ecosystems to grow around them.

A list of the 20 largest companies by market capitalisation from 1989 and 2021.?It is a formidable list assembled by Berkshire Hathaway and includes many of the companies from the United States.?This list does not include an Australian company.?

It is unlikely that we will produce enough companies to increase our chances of launching companies onto this list if we do not change the trend reported by the Startup Muster Report of 2018 which featured analysis by CSIRO’s Data61. The report shows growth in startups in Australia until 2017 followed by a sharp decline of 12% to 2018.?I cannot tell what’s happened since then, because after five years of data gathering, the research is no longer funded.?While PitchBook data, seed stage investments increased from 2015 through to 2017, they declined for the next three years, with a total reduction of 60%. And the Early Stage Venture Capital Limited Partnerships registration database shows registrations increasing each year until 2017, then dropping off in subsequent years.

And the StartupAus Crossroads Report for 2020 tells us that both the number of deals and the aggregate dollars invested in early stage Australian startups between June 2014 and 2019 has fallen.?Taxpayers already spend between AUD 6-8 billion each year to fund innovation programs. We have seen 60 reports prepared by the Commonwealth on innovation between 2000 and 2015 according to a?report?by Emeritus Professor Roy Green.?By spreading the investment too thin, the impact is lost and the return on investment is low.

I see a similar problem with our Free Trade Agreements.?The effort was put into negotiating and signing them, but the opportunities are not always maximised.?Australia and the United States signed an FTA in 2005. It is great to see such a strong performance by the United States.?The question though, is why Australia has been in deficit for the entire period and why this is something we appear to celebrate?

We find the same pattern in our significant investment in research and our weak results on commercialisation, where we rank among the lowest performers globally.?This normally happens when global multinationals operating in a market send their sales offices, not their product development teams who benefit from the research being done in local universities.?

Global companies should send their R&D with their sales offices to Australia

This is another important contribution that ATSE can make.?Unlike our Chinese neighbours, we have not attracted the factories, nor the research and development, nor the production facilities that are needed to then develop the next generation products, giving us a competitive advantage.?In 1990, when I visited China, there were only four foreign owned R&D centres.?Twenty years later, there were 40,000.

We seem to have lost sight of the fact that when we own production, we own research and development and if we own research and development, we own the products.?This then becomes our competitive advantage.?Manufacturing then becomes a capability and modern manufacturing becomes an ecosystem.?

And as every engineer will tell you, the ecosystem of manufacturing is from research to prototyping to production and scaling and selling and designing the prototype for the next product.?

I celebrate the many successful companies across the country that are doing all of these things and I think we need more of these companies, clustered around specific sectors and supported by more complete ecosystems. And that is the problem, the challenge, and the mission I suggest ATSE takes up.?

The Australian Design Council of which I am a part will be running National Design Challenges using a design-led framework to apply design thinking as a strategy for sectors with comparative advantage to unlock their competitive advantage. Another opportunity for the ATSE community to engage.?

Commercialisation needs to become a priority?

Recently I was being shown around a university research lab. PHDs presented groundbreaking research they were doing into green hydrogen.?I was impressed by what I was seeing and asked whether they were talking to business? What do you think they said??They’re not ready to talk to business because they’re focused on getting their research published.?So with their permission, I introduced the work of these PHDs to an investor with an interest in green hydrogen in Australia - their response? The business was too ‘early stage’. I stopped and thought yes, that’s the point.?I ended up introducing the work to global investors, who jumped on the technology, because they understood its value and are now funding the research and commercialisation offshore.?

I have no doubt this is happening in research labs around the country and it must stop.?I understand we had a program called ON that was designed to skill researchers in commercialisation. Great I thought, where can I see it in action? Too late, it’s no longer funded.

Let's talk about investment

Alan Kohler recently published a piece in the New Daily with a thesis that SAAS companies weren’t really tech companies and were receiving more funding than they deserved while deeptech companies, modern manufacturing companies who were building important new businesses struggled.?

Alan identified 10 of these companies.?Again, we stand in the way of our own success.?We have entrepreneurs launching the companies and investors standing back and making insufficient early stage capital available for Australian companies. This makes these companies ripe for the picking by global VCs and investors.?More often than not, when companies are funded in the US, they are listing there and operating from where the customers are and employing more Americans than Australians.?Yet, we have a market that has over 4.6billion people to our North.?

Some questions to ponder

And so I ask again:

• where is Australia's ambition??
• where is its propensity to take risks??
• what are the points of friction and how do we remove them??
• why are these companies Alan identified struggling to access capital??
• we export capital to global VCs and other asset owners, why are we not investing more of that capital in good long-term businesses here?

The Modern Manufacturing Initiative

We have started the work of building a modern manufacturing economy in Australia.?This follows on from a piece of work I did last year as part of the NCCC process.?

It has been launched as the Modern Manufacturing Initiative and it focuses on building out sectors around which ecosystems will form and from which the winners will emerge, meaning that Australia can begin to dominate niches.

This strategy is not about building unicorns - although there is no doubt they will emerge.?This strategy is about building sectoral strength that will endure.?

The world’s leading nations are sitting at around Industry 4.0 and I’m thinking of Germany when I make that statement.?Australian industry is regarded by many around the world as hovering around the Industry 2.0 level, some might argue we are at Industry 3.0.?Our opportunity is to leapfrog to Industry 5.0. The opportunity is there for ATSE to lead the way with great research that contributes to the success of the businesses with whom they collaborate to lead in their fields globally.?

I am delighted to see a continued focus on the space sector because the future industries will be the space industries. We already have precision agriculture, marine tracking, border security and even the timing for financial transactions relying heavily on space.?Australia’s capability in the mining and oil and gas sectors around remote asset management suites of technologies that allow huge logistics trains to be operated with a minimal number of people in a very safe way is also important, because it is that technology that is needed as you look at the exploration of space and going to the moon.

I am encouraged by the prospect of Australia building its capability in resources technology and critical minerals processing.?Australia’s Robyn Denholm, the Chairman of Tesla, observed in the AFR recently that Tesla alone will consume more than AUD 1 billion of Australian lithium, nickel and other critical and rare earth minerals for batteries and electric motors.?By 2030, there is an expectation that a lithium ion battery market will be worth AUD 400 billion which is eight times the revenue generated by coal exports in 2020. Tesla has since announced that they would be sourcing nickel from BHP.

And as an aside, with Lucid Motors, which I chair, recently listing on the Nasdaq, we have the two largest EV companies in the world chaired by Australians.

I was delighted to see an Indigenous business thriving in my hometown of Darwin.?The Kakadu Plum company is an Indigenous owned business that supplies fresh Kakadu Plums as well as a powder version made from freeze-dried Kakadu Plums produced in Darwin.?An example of the value adding to which I was referring. The Australian Design Council has been collaborating with Food Innovation Australia and profiled a number of Australian businesses in the Food and Agribusiness sector who used a design-led mindset and practices to grow their business.?The Food and Agribusiness Sector was selected based on its potential for growth from a A$61bn to a A$200bn sector by 2030.

What's the ATSE playbook?

Here are some suggestions to get this started. Today I'm going to focus on four of these:

1. Securing bi-partisan support for industry and innovation policies that take a long term focus?
2. Establishing deeper and closer ties between business and research so that we can improve our rate of commercialisation?
3. Unlocking capital to fuel growth of companies and scale them globally to employ more Australians and attract the talent we need to compete.?
4. Negotiating 21st Century Public Private Partnerships designed to increase collaboration and create opportunities for growing new sectors

And, like China, Israel and Ireland we need to get much better at engaging with our diaspora.?

One thing is clear. It is time for action.?

The strategy must now be delivery.?Dow, the company I led as CEO and Chair was transformed from a cyclical chemicals manufacturing company into one powered by science, driven by innovation and delivering solutions to the world.?During my tenure as CEO, it delivered meaningful, science-based innovations at a rate of ten times as many experiments as the Dow of a decade ago and eight times as many patents per year. We had huge ambitions and were motivated to act.

I want to capture the lessons learned and make them available to the next generation of global leaders.?We need bold and courageous leadership with transformational thinking to become the linchpin for grand scale, transformative and sustainable change.?This is why I’ve made a philanthropic gift to the University of Queensland that has built the Liveris Academy for Innovation and Leadership.?My commitment to the ATSE Community is that if you figure out the ‘what’, I will help you with the ‘how’.

When I turn to our situation in Australia I think of Thomas Edison’s aphorism: “Good fortune is what happens when opportunity meets with planning." Australia’s innovation opportunity now has a path to progress in the form of the Modern Manufacturing Initiative and ATSE’s contribution is vital to its success.?

If there’s a door you need opened and I have a key, I will be there to unlock the opportunity. ...

About Andrew N. Liveris

Andrew Liveris is the former Chairman and Chief Executive Officer of The Dow Chemical Company and the former Executive Chairman of DowDuPont. He is currently a director at IBM, Saudi Aramco, Worley, Lucid Motors (Chairman) and NOVONIX. He is on the advisory board of Sumitomo Mitsui Banking Corporation, Teneo (a global CEO consulting and advisory firm), and NEOM (an initiative driven by Saudi Vision 2030). He is Chairman of the Blackrock Long Term Capital and a special advisor to the Public Investment Fund (PIF) and the Crown Prince of Saudi Arabia. More