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Client Update: Innovation and competitiveness agenda to benefit the resources and energy sectors

6 November 2014

In brief: The Federal Government has released its Industry Innovation and Competitiveness Agenda, the industry-led growth and innovation component of its broader Economic Action Strategy reform. Industry participants in the resources and energy sectors will benefit from proposals which aim to increase competitiveness and drive economic growth in these prioritised sectors. Partner Igor Bogdanich (view CV) and Lawyer Ellie Mulholland report on the proposals.

Industry Innovation and Competitiveness Agenda

On 14 October 2014, the Federal Government announced the Industry Innovation and Competitiveness Agenda (the Agenda), as the latest step in its broader Economic Action Strategy reforms. The Agenda highlights Australia's declining competitiveness as a key barrier to Australian businesses taking advantage of the opportunities flowing from the increasing economic growth of Asia and growing integration of the global economy.

The Agenda identifies four 'ambitions':

  • a lower cost, business friendly environment with less regulation, lower taxes and more competitive markets;
  • a more skilled labour force;
  • better economic infrastructure; and
  • industry policy that fosters innovation and entrepreneurship.1

Falling squarely within the Federal Government's broader economic reforms, the Agenda sets out what the Government has already done, and what it plans to do, to further these four ambitions, and includes seventeen new proposals.

The Agenda draws heavily from insights from the Business Council of Australia's Building Australia's Comparative Advantages discussion paper released in July 2014,2 including its focus on priority sectors. The resources and energy sectors have collectively been endorsed by the Federal Government and state and territory Trade and Investment Ministers as one of the five 'priority areas'.3 Specifically, the Agenda identifies the LNG industry (as the biggest driver of growth in the resources sector) and the mining services sector as two of the 'industries with promise'.4

Reform proposals impacting on the resources and energy sectors

The Agenda promises further action in ongoing reforms, such as the 'one stop shop' environmental approvals 5, and ongoing reviews, such the Energy White Paper6 and the Competition Policy Review.7 (For further information, see our: Focus: Amendments to Federal environmental regulation, Focus: Federal Government Energy White Paper and Client Update: Competition Policy 'Root and Branch' review draft report released.)

Additionally, the Agenda sets out new proposals to reduce the regulatory burden on industry participants in the resources and energy sectors, including:

  • Accepting trusted international standards and risk assessments – the Government will adopt a principle that if a system, service or product has been approved under a trusted international standard or risk assessment, then Australian regulators should not impose additional requirements unless there is a good reason to do so. The Government will review the Commonwealth Standards across ministerial portfolios, and will require the National Industrial Chemicals Notification and Assessment Scheme to increase its acceptance of international risk assessments of materials by trusted overseas regulators.8 This is proposed to be implemented by late 2014, with some ongoing targeted consultation by the Department of Health.9
  • Streamlined Customs processes for 'trusted traders' – exporters and importers with strong security practices and a proven track record of compliance will benefit from reduced screening examination and priority treatment, in a 'trusted trader' program to be co-designed with industry to commence in July 2015.10
  • Examine coastal shipping regulations – the Government will consider reform to coastal shipping regulations which create higher freight costs and erode the viability and margins of businesses which use these services, which include many participants in the mining and oil and gas industries.11
  • Appointment of senior investment specialists – the Government is appointing five private sector specialists to Austrade to facilitate foreign direct investment, including one each dedicated to resources and energy, and infrastructure (with expertise in public-private partnerships).12
  • Expanding access to the Commonwealth workers' compensation scheme – the Government will seek advice on the viability of expanding access to the Comcare workers' compensation scheme and work health and safety laws to eligible private employers as premium payers. This would allow employers working across multiple jurisdictions in Australia to choose whether coverage by a single national scheme may be more competitive than existing coverage under multiple schemes.13 The Minister for Employment will oversee consultations throughout late 2014 to early 2015.14

The resources and energy sectors will also benefit from commitments to the Federal Government's Infrastructure Investment Programme, although there are no new proposals in this area.15

The proposals to promote a skilled labour force are directed towards the development of crucial skills relevant to the workforce in the resources and energy sectors. The proposals include policies to increase the focus on science, technology, engineering and mathematics at schools,16 and improve the Vocational Education and Training system.17 A key proposal in this area is:

  • Streamlining the subclass 457 visa program – the Government will implement the key recommendations of the Independent Review of the Integrity of the 457 Program throughout 2014-15, including reforming sponsorship requirements to reduce the time and cost to businesses which take advantage of this skilled temporary migration program.18

The Agenda focuses on industry-led innovation, with proposals to encourage a 'culture of entrepreneurialism and responsible risk taking',19 which include:

  • Industry Growth Centres – with a commitment of $188.5 million, the Government proposes to establish five non-profit Industry Growth Centres to address sector-wide impediments to productivity. The centres will encourage businesses to form commercial research and development partnerships with each other and with the research sector. The Minister for Industry will seek expressions of interest from business-led consortia to establish the centres, and proposes that one of the centres will be in the oil, gas and energy resources sector. Each centre will receive initial seed funding, and then be eligible to apply for competitive grants from a $63 million Growth Centre Project Fund. The centres will be rolled out from early 2015.20
  • Enhancing commercial returns from research – through consultation with industry and the research community, the Government will develop and implement a strategy to more effectively translate research into commercial outcomes. The Prime Minister's Science Engineering and Innovation Council will be reinvigorated as the Commonwealth Science Council. Five business leaders will join five eminent scientists or researchers on the council, which will be chaired by the Prime Minister, with the Minister for Industry as deputy chair. By the end of 2014, the Government aims to have identified the necessary policy changes to adjust tax and research funding mechanisms to encourage collaboration between research and industry, support world-class research infrastructure and promote intellectual property arrangements that facilitate collaboration and commercialisation of ideas.21 Given that many of the growth opportunities for companies in the mining services sector stem from the ability to commercialise innovative technology solutions, the sector is particularly well-placed to benefit from this policy reform.
  • Improving taxation arrangements for employee share schemes – recognising the value of employee ownership in driving productivity, the Government will reverse 2009 changes to the tax treatment of employee share schemes (ESS) options which effectively ended the practice. Additionally, ESS shares in certain start-ups will be eligible for concessional tax treatment, and the maximum timeframe for tax deferral will be extended from seven to 15 years. The initiative will cost $200 million over four years and looks set to encourage entrepreneurship in smaller resource and energy businesses. The Federal Treasurer will consult with industry with legislation proposed to come into effect on 1 July 2015.22

Implementation of the Agenda

The projected timeframe for implementation for most of the proposals is throughout the rest of 2014 and 2015.23 In addition to targeted consultation on specific proposals, the Government will host stakeholder roundtables over the coming months, each focusing on one of the four ambitions.24

Footnotes
  1. Industry Innovation and Competitiveness Agenda, Department of Prime Minister and Cabinet, October 2014, pIII.
  2. See Building Australia's Comparative Advantages, Business Council of Australia, July 2014.
  3. Industry Innovation and Competitiveness Agenda, op. cit, pXII.
  4. Ibid, p11.
  5. Ibid, p29.
  6. Ibid, p41.
  7. Ibid, p40.
  8. Ibid, p31.
  9. Ibid, p87.
  10. Ibid, p39.
  11. Ibid, pp43-44.
  12. Ibid, pp 38, 67.
  13. Ibid, p32.
  14. Ibid, p 87.
  15. Ibid, pp63-64.
  16. Ibid, pp51-52.
  17. Ibid, pp52-53.
  18. Ibid, pp55-56.
  19. Ibid, p22.
  20. Ibid, pp72-74.
  21. Ibid, pp74-76.
  22. Ibid, pp 76-78.
  23. Ibid, pp 87-90.
  24. Ibid, p85.

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