2018 Australian Financial Review

Dig Howitt"We want to stay a strongly Australian company ... for us to do that Australia needs to have a globally competitive business environment," Cochlear chief executive Dig Howitt says

Blood products giant CSL and hearing implant pioneer Cochlear have called on the federal government to be more assertive in courting biotech and technology investments, warning Australia will continue to lose out to countries offering generous incentives to attract cutting-edge industries. The two companies, rare examples of local world leaders, note that only four Australian groups made a PwC list of the top 1000 global research and development spenders in 2017 – themselves, Telstra and Aristocrat Leisure. They cite data showing business research and development spending had fallen from $18.9 billion in 2013-14 to $16.7 billion in 2015-16.

CSL and Cochlear called on the government to match the aggressive courtship practices of Switzerland, Ireland, Singapore, the US and the UK, with lower taxes, easier access to skilled immigration and an urgent shakeup of Therapeutic Goods Administration timelines.

Despite the Turnbull government's innovation agenda and more venture capital going into start-ups, Australia's approach remains unco-ordinated and subject to reversal – such as last year's "Australia first" skilled immigration changes.

In Switzerland, where CSL has big plants, the government is constantly knocking on the company's doors asking "what's next?" and "how can we help?" said chief financial officer David Lamont.

Even in countries where CSL doesn't have plants – such as Ireland and Singapore – governments "actively come out and court companies like ours" with a unified package of incentives and benefits, he said. These could include a lower headline tax rate, and other financial concessions or benefits in exchange for specified investment, jobs and revenue outcomes from biotech and technology. By contrast, in CSL's home country of Australia, "We'll quite often go to [the government] ... it's not so much the other way around," Mr Lamont said. "These are areas that every other country around the world is actively pursuing as well, and Australia is not very active."

And far from finding a one-stop shop, states compete with each other for big investments so "we need to go and ... pitch at each one of those”.

The submission calls for a lower company tax rate or targeted tax breaks to match Britain, the US and Singapore, which have made their taxes more welcoming while Australia has cut R&D tax incentives.

Cochlear chief executive Dig Howitt said they're not threatening to move and Cochlear welcomed budget changes to the R&D tax incentive which reward higher R&D "intensity", or R&D as a share of sales. "We want to stay a strongly Australian company. The point we are making is that for us to do that Australia needs to have a globally competitive business environment," Mr Howitt said.

The two companies say Home Affairs Minister Peter Dutton's original skilled immigration changes would have devastated local business R&D and while the government backpedalled after an outcry it didn't go far enough. As world-leading Australian-based healthcare tech firms they can't get all the skilled workers they require here and need access to talent quickly and simpler intra-company transfers to and from Australia to raise skills. Skilled immigration restrictions add cost and delay, and "that just has a knock-on effect across the business", Mr Lamont said.

Mr Howitt said the government had become a lot more co-operative since retreating from its initial proposal and he was confident it would be sorted out. But a new Global Talent Scheme designed to make it easier to recruit top talent had an unrealistically high $180,000 annual salary threshold.

The Therapeutic Goods Administration (TGA) often takes longer than either the US Food and Drug Administration or the European Union authority to approve new products and needs an explicit mission to foster innovation – like the FDA – instead of being a handbrake on innovation, the submission says. The TGA had resolved to do better by bringing in an "express pathway" for innovative products and to leverage trusted foreign approvals authorities such as the FDA but implementation was cautious and patchy and it is still quicker for biotech and medical tech start-ups to start manufacturing in Europe or the US, even if the product is developed in Australia.

Cochlear's revolutionary Kanso off-the-ear sound processor took four months for European approval, and six months in Australia. The TGA beat the FDA to approve a minor feature of the Nucleus 7 – the first made for iPhone sound processor – but had "taken longer than we would have liked" with the last major approval for the Ci532 implant. Cochlear still wants to see more evidence that the TGA is changing its ways, Mr Howitt said.

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