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Transforming the Lucky Country to the Competitive Country

arm-wrestling-567950_960_720“The Lucky Country” – the expression has single-handedly become shorthand for describing our weather, our lifestyle, and our history. First coined by Donald Horne in a rather sarcastic manner in 1964, the book has gone on to become a cult classic, as well as trademarking Australia with a nickname.  Although, is it time we departed from our good fortune and became more competitive instead?

Traditionally, when public discourse states the need for Australian firms to be more competitive, it usually refers to the government implementing policies that make it easier for firms to compete with their foreign rivals. However, this is not quite what economists propose when they say heightened competition is a key driver of improved economic performance. Rather, they mean Australian firms should be forced to improve their own performance by exposing them to greater competition with other Australian firms.

To clarify, John Fraser, the Treasury Secretary of Australia, explains that competition is at the heart of how market economies are organised. “Competitive markets generally deliver benefits for all Australians in a way that sheltered markets fail to do so,” he says. “Effective competition in our economy is a key part of its strength and dynamism. Competitive markets benefit consumers by putting downward pressure on prices … And over time, competitive pressures drive innovation and investment in new technologies and the development of new products and quality services that meet the needs of consumers. This process of innovation is what drives economic growth and improvements in living standards in the long term.”

Indeed, as can seen from the above, competitiveness certainly can aid innovation on a firm level, but can it assist innovation in Australia as a nation? For instance,  Philip Dalidakis, Victoria’s innovation minster, has been shamelessly competitive in ensnaring start-ups and innovation events from other states, having pinched the SydStart conference — to be retitled StartCon — and habitually stirring his NSW counterpart on Twitter. In opposition, NSW’s minister for innovation Victor Dominello,  called for an end to “schoolyard games” and believed competition was fruitless.

Despite this, Assistant minister for innovation Wyatt Roy has backed the Victorian government’s competitive agenda.  Roy described that the rivalry produces strong outcomes and he wants to see more competitive tension between the states. In particular, he believes fierce rivalry with the likes of New South Wales and Queensland would lead to better policy creation, and there would be room for more than one innovation hub in Australia.

As elucidated above, there is certainly a link between innovation and competition. In fact, research by Aghion, Bechtold, Cassar and Herz (2014) showed that increased competition leads to a significant increase in research and development (R&D) investments by neck and neck firms, which subsequently boosts innovation. Besides supporting the creation of new products, processes, and software, R&D can increase profits and knowledge for a company. It not only benefits firms,but  the avails of new knowledge can have positive spillover effects on the broader nation’s innovation levels. Additionally, companies can benefit further by utilising the government’s R&D Tax Incentive. Find out if you’rer eligible for the R&D Tax Incentive in our blog: How Do I Know If I do R&D & If I Qualify for the Tax Incentive?

 

AusGrant is one of Australia’s leading grant consultancy services, providing specialist services relating to grant submissions to federal and state government agencies.

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