Globalisation has transformed the way we do business. With advances in technology over the past few decades we have seen the advent of global supply chains, expanded global distribution networks, and more importantly for developed economies such as Australia, the need to compete on a global basis not just for ideas, but to keep them onshore, to create jobs and boost economic activity.
Governments worldwide are grappling with the challenges, albeit with mixed success. And they are looking to each other for inspiration. In my view they could do worse than seek to emulate the success the UK is starting to achieve.
The UK has successfully recognised that as businesses and investments have become globally mobile, to attract global investments, and create high paying local jobs, a government needs to establish an attractive business-friendly environment that makes any decision on where to invest a simple one.
Just this year, annual inward investment figures in the UK rose by 14 per cent, reaching the highest level since records began in the 1980s. Lord Livingston, the UK's Trade Minister recently stated that "It's been an exceptional year for foreign investment. It shows that our strategy to attract investors to the UK by creating one of the most business-friendly environments in the world is the right one." The data is in. The Minister is right.
And this isn't the only example. Britain's self-employment job numbers have also risen by 8 per cent in the past year with many attributing this growth in part to higher number of entrepreneurs seeking to capitalise on the UK's aggressive innovation regime.
Contrast this with our experience in Australia. As a nation, Australia has created innovations that have transformed the lives and businesses of people around the world. From cochlear implants to spray on skin, building techniques including the Favco tower crane, the black box flight recorder in aircraft safety and world leading technological advances including Wi-Fi and the first quantum bit.
We are not short of ideas. What we do lack, and what is now putting our global competitiveness at risk, is our poor offering in terms of a globally attractive, business-friendly environment.
In a recent Senate Committee Inquiry into Innovation in Australia I outlined the need to establish a culture of innovation, one which would allow us to compete on a global basis and attract and retain our best and brightest talent.
There are a veritable roll call of examples of fantastic innovations which have started off in Australia but then quickly moved to Silicon Valley in the US, to the UK or Singapore. That is seen as the path for growth. This needs to change.
We need to emulate the UK's example by prioritising the creation of a business-friendly environment which makes it possible to innovate and remain in Australia but that also makes Australia the first choice when global businesses are looking to invest.
Take the UK's patent box approach as a poignant and tangible example. Under this system, if you innovate in the UK, your income stream from the innovation becomes half of the corporate tax rate, which come 2015, will mean you are only paying 10 per cent on this income stream. So when a business is facing a decision about where to locate its research and development arm, with potential innovations worth billions of dollars, the choice between 30 per cent on any income or 10 percent won't require a lot of debate.
This is exactly the kind of policy innovation CPA Australia is urging the Australian Government to consider. In an ultracompetitive world we have no choice. As the UK has shown, to compete on a world stage, innovation should be at the forefront of government policy, as a driver of change and as a key determinant in future economic growth.