Commission of Audit wants to abolish Commercialisation Australia, IIF fund



news The new Coalition Government’s Commission of Audit (CoA) has recommended the Federal Government “abolish” key early stage innovation industry support vehicles Commercialisation Australia and the Innovation Investment fund, in a move slammed by venture capitalists as simply getting it “wrong”.

Commercialisation Australia offers funding and resources to accelerate the business-building process for Australian companies, entrepreneurs, researchers and inventors, with grants of up to $50,000 to access specialist advice and services, up to $350,000 to engage senior executives, up to $250,000 to establish proofs of concept for new intellectual property, and up to $2 million to take a new product, service or process to market.

However, in the CoA’s report published last week, the organisation was heavily criticised. The report recommended the organisation be abolished, stating: “Commercialisation Australia assists Australian businesses through the process of turning new ideas into commercial outcomes. The intellectual property, and any profits arising from these new ideas remains with the business, and there are no clear public benefits arising. The process of commercialising new products can often be a difficult one. However, skills and finance can be acquired from the private sector, and there is no clear reason for the Commonwealth to provide this assistance in competition with private sector providers.”

Similarly, the report also recommended the Innovation Industry Fund be abolished. The group was set up to co-invest government venture capital into early stage companies, matching contributions by industry funds such as Carnegie Venture Capital, GBS Venture Partners and Innovation Capital Associated. It has existed for around 14 years and has helped successful companies such as job site SEEK get established.

“The Australian venture capital sector is small and relatively new,” the CoA report stated. “While there are definite private benefits to Australian companies from the commercialisation of their intellectual property, the public benefits from commercialisation and support through the Innovation Investment Fund are less clear. The venture capital sector receives government support through existing tax concessions.”

The recommendations were immediately heavily criticised by the Australian Private Equity and Venture Capital Association, which issued a strongly worded statement on the issue. The recommendations were “flawed and demonstrate a lack of genuine commitment to fostering a stronger Australian economy in the future”, according to the association.

“The Commission of Audit has got this wrong – abolishing key support programmes such as the Innovation Investment Fund and Commercialisation Australia is not going to help our economy to become more innovative and more competitive into the future,” said AVCAL chief executive, Yasser El-Ansary.

“A small open market economy like ours has to focus on assisting Australian businesses to compete on the world stage, and that’s hugely important to bringing about productivity-enhancing reforms that will create more jobs and more economic growth in the years ahead. The Commission of Audit recommendations to abolish the Innovation Investment Fund and Commercialisation Australia have been made without there being any credible or compelling argument in support of the conclusions.”

“What we wanted to see from this review was a comprehensive analysis of how government spending obligations can be re-prioritised to deliver greater economic efficiency, and better long-term outcomes for Australian businesses. In the context of Australia’s innovation system, the Commission looks to have fallen into the trap of taking a short-term view on cutting expenditure that will have a potentially devastating impact on our long-term prosperity.”

“The Government needs to carefully consider the recommendations made in this report, and decide whether or not they can afford to abandon their support for the creation of a more modern and innovative future Australian economy.”

“Given the significant structural change that is taking place right now across key industry sectors such as manufacturing, the Government must put in place policies that promote greater private sector investment in new business ventures, which will ultimately play a vitally important role in Australia’s future economic growth,” El-Ansary concluded.

Hmm. This is a tough one. On the one hand, there have been demonstrable outcomes from both of these organisations over the years. Both have played a role in strengthening Australia’s fast-growing innovative (including technology) business sector, and both have an established position actively helping Australian industry. Many people will be upset to see them cut by the Abbott Government.

However, on the other hand, the Commission of Audit is completely right: Private sector structures already exist to serve the same purpose when it comes to capital (just look at the sheer amount of money raised recently by several major Australian technology firms, as well as the bevy of companies getting funding from the local stockmarket), and it seems quite absurd for the Federal Government to be tilting the business playing field by granting some companies money for purposes such as hiring an experienced chief executive, when other companies won’t get the same assistance.

There are valid views either way. But personally, my view is that the Federal Government should abolish these institutions. Both represent quite an ‘activist’ approach to intervening in Australia’s business sector and economy, while as a fan of small government and minimal government regulation (and as a business owner), I would prefer if the Government kept out of business as much as possible and let the market sort itself out through taking a very neutral, stable, minimalist approach.

There are some areas which will never successfully be wholly served by the private sector: Education, public transport and health, to name some of the more obvious ones. However, there are other areas, such as IP commercialisation, business growth and venture capital which clearly will be served by the private sector. It is my strong feeling that the Government should get out of those areas and leave private industry to itself.

What should the Government do instead? Fix the employee share scheme mess in Australia and apply sharp tax cuts to the early stage, fast-growing startup sector in Australia, as well as applying further tax cuts for venture capital and angel investors to incentivise them to invest more. These would be much more powerful structural changes appropriate for a Government wishing to stimulate this area of the economy, and ones that would have a much more wide-ranging effect than merely picking individual growth winners, as Commercialisation Australia and the IIF are substantially wont to do.

Image credit: Marcel Hol, royalty free


  1. This is an interesting article and most of the analysis seems reasonable except for one massive logic error. The comment that “Private sector structures already exist to serve the same purpose when it comes to capital (just look at the sheer amount of money raised recently by several major Australian technology firms”. There are several problems with this statement, the two most important being:
    (1) Major technology firms have no problem is attracting capital and the Commercialisation Australia program was not directed towards these companies. To become a major company, first you need to bridge the “valley of death” which is where CA was able to help enormously.
    (2) Australia has a well developed market for capital for larger technology companies – not for smaller start-ups. We have raised virtually 100% of our capital from offshore. If we had to rely on the local markets our company would simply not exist.
    It will be interesting to see how the new fund is set up and its funding structure. Hopefully they get this one right because if they don’t there will be fewer “major Australian technology firms” as new firms will struggle even harder to get across the valley of death.
    On a final note I agree 100% with fixing up the employee share scheme mess in Australia. It is a complete joke. It seems designed to ensure small companies can’t incentivise employees…

Comments are closed.