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Labor jobs plan welcomed but R&D cut hurts

Proposal to support jobs has had a mixed response, with many concerned about the cut to some R&D tax credits to fund it

A federal government plan to cut $1 billion from research and development tax incentives to big business to pay for measures to boost smaller companies has raised concerns it could be counterproductive.

Prime Minister Julia Gillard unveiled the government's plan for Australian jobs in its industry and innovation statement on Sunday.

The three-part proposal involves legislating to make sure major projects give local suppliers a fair go, setting up innovation precincts and helping small and medium-sized businesses to grow. Ms Gillard says the billion-dollar plan will lead to a more prosperous future and more jobs.

"It's about making sure that we win more of the work available here in Australia," she told reporters in Melbourne on Sunday.

"It's about supporting our businesses so they can seize more of the work in our region of the world - more exports, more opportunities and consequently more jobs."

Labor will put an Australian Jobs Act to parliament to create the first legislative requirements for the use of local contractors.

Under the proposal, projects worth $500 million or more will have to outline how local suppliers would get a fair chance to secure work. Projects worth more than $2 billion will also have to set up an office of Australian industry capability in their procurement headquarters.

Industry Minister Greg Combet said this wouldn't mandate the use of Australian suppliers but would make sure developers of big projects were upfront about contracting opportunities.

Ten innovation precincts will be established to encourage industry, research institutions, technology experts and government agencies to collaborate on new business opportunities.

The third part of the plan involves measures to improve access to finance for small and medium-sized businesses and give them more help in the government procurement market.

To fund this, the government would cut the research and development (R&D) tax incentive for businesses with an Australian turnover of more than $20 billion.

Mr Combet said this would only affect 15 to 20 companies.

Another 10,000 companies would keep the tax incentive and the biggest companies would still have ordinary tax deductibility for R&D expenditure, he said.

Universities Australia said it was an exciting new approach to innovation policy.

The Australian Workers Union (AWU) described the plan as a game changer for manufacturing, while the ACTU said the new laws would be a step towards creating a level playing field for Australian companies.

"It has long been a concern...that major resource and infrastructure projects do not even look at what they could source locally," ACTU secretary Dave Oliver said.

The Australian Manufacturing Workers Union national secretary Paul Bastian said there was no short-term fix for the manufacturing sector but this plan was an improvement.

But opposition industry spokeswoman Sophie Mirabella said the plan just rebadged a 2011 promise for industry research hubs that hadn't been established.

Ms Mirabella criticised the "chopping and changing and reducing access to the R&D incentives". Her concerns were echoed by Minerals Council of Australia chief executive Mitch Hooke.

"The Reserve Bank governor has previously noted that the Productivity Commission has an extensive to-do list to improve productivity, including the streamlining of regulation and red tape," he said.

"For the most part, this statement, with its emphasis on bureaucratic intervention in commercial decision making, goes in the opposite direction."

Mr Hooke said mining companies already bought Australian when it made good business sense to do so.

The Australian Chamber of Commerce and Industry said the package deserved support.

"It is rightly targeted at arresting eroding competitiveness and understandably weighted towards industries in transition," chief executive Peter Anderson said.

Australian Industry Group chief executive Innes Willox wants to discuss the plan's details.

"Denying access to the R&D tax incentive for such businesses may run counter to some of the objectives behind the industry and innovation statement," he said.

The Australian Greens want the government to mandate a minimum level of Australian content big projects have to use.

Follow CFO World Australia on Twitter: @CFOworld_AU, or take part in the CFO World conversation on LinkedIn: CFO World.

Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.

More about: ACTU, Productivity Commission
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