Productivity growth is the centrepiece of Helen Clark’s third term and she told us last week “science and innovation are critical to driving our prosperity”. But the numbers — and the logic — don’t add up.
The government’s strategy for “driving prosperity” is in its vaunted growth and innovation framework (GIF). Research, science and technology (RS&T) is a core element of the GIF.
There are other ingredients of productivity growth. Workplace practice is a one and a tripartite task force is trying to spread best practice. The government is building more infrastructure and Michael Cullen has taken the reins on skilling.
But arguably the biggest contributor is investment. On some analyses, Australia’s higher productivity growth (and so higher wage growth) than New Zealand’s during the 1990s was largely due to higher investment (though the minerals boom there and two drought years here surely played some part).
How does investment lift productivity growth? By introducing new and better technology.
You can buy technology or make it from new science. And you can buy in the new science or make it.
Logically, a small country will buy in most science and technology (or foreign investors will bring it in). That is one reason the private sector’s contribution to research, science and technology is far below the OECD average.
But that doesn’t wash with pastoral products, which produce a large chunk of the export cash flow and, we have rediscovered in the past half-dozen years, constitute our competitive advantage (along with horticulture), thanks to good science and a beneficent climate. For those industries we must do our own science or we lose competitive advantage.
AgResearch, the government’s pastoral industries Crown research institute (CRI), has been making this point with some force recently. And it has backed a group of six dairy companies, including Fonterra, called “Dairy 21”, which says $60 million more spending is needed to get its industry’s on-farm research budget back in real terms to where it was in 1992.
AgResearch got so blunt in statements in the past month that Research, Science and Technology Minister Steve Maharey suggested bluntly it toned down.
* “The (AgResearch) board has been increasingly concerned about the relatively low level of recognition of the contribution made by our pastoral sector by politicians and public alike.”
* “Agriculture is where it is because of science. The country’s scientific research and our innovative biotechnology are the engine behind our continued success in agriculture.”
* “We must lift funding from all sources if we are to make the quantum shifts necessary to maintain our competitive advantage.”
* In the election “the pastoral sector was not at all present in the minds of candidates or voters.” (In fact, the National party thought so little of science that it could manage only an “interim” policy in the election. There is still no RS&T policy on its website — though “political correctness eradication” is there.)
AgResearch’s and Dairy 21’s point is simple. Pastoral industries’ productivity growth has been phenomenal over the past 20 years, thanks largely to RS&T.
But, after a decade and a-half of focus on CRIs’ balance sheets, competitive bidding, a balkanised research sector and short-term funding, the stock of basic science on which to draw is running very low, so low it has alarmed some top bureaucrats — and not just in the science institutions.
OK, so why not buy it in?
Because (a) nobody else does pastoral and horticulture products the way we do, (b) nobody else has our specific environmental issues (critical to our clean-green brand) and (c) if we buy in the science we are by definition giving up our leading edge.
So we have to do our own science to maintain the competitive advantage in our flagship sector. And that needs more scientists and more money.
Maharey has got centres of excellence going in universities (out of the education budget) and intends to identify “key areas of national research excellence” and lay out how to maintain long-term capability for each area. He has freed up some funding so CRIs can do more long-term science and has talked of lifting that “bulk funding” to 60 per cent of their total.
And he is aiming to bring together all RS&T funding into a single budget “envelope” and commit to a “multi-year funding path”. That would give greater certainty.
All very fine and the science community applauds.
But none of that says anything about total spending. He is wistfully hoping the private sector will spend more and thus get total spending up from around 1.2 per cent of GDP to 2 per cent, above Australia’s 1.6 per cent though below the OECD average of 2.3 per cent.
That’s a big hope. And in any case Maharey himself is underspending. Over the past six years the government’s contribution has remained stuck around 0.5 per cent of GDP. And that is below the OECD government average of 0.7 per cent.
Do Maharey and the government really mean what they say about lifting productivity growth and getting us back up the OECD table? One opportunity to rescue the GIF from the attic of hollow rhetoric is through a step-change in RS&T spending in the 2006 Budget now being bargained over by ministers.
If Maharey loses, we all will. History tells us to get ready to lose.