Innovation drives productivity and better living standards

“Innovation, when you think about it in simple terms, is about new ways of doing things, better ways of doing things,” he said.

“Forty-five per cent of Australian firms at the moment are engaging in innovative behaviour, 70 per cent of our jobs are within those firms that are engaged in innovation, and 60 per cent of our national productivity comes from innovation.

“So the biggest driver of better living standards in Australia is productivity and the biggest driver of productivity is innovation – so that’s why it matters.

“When we talk about innovation it’s (often) new businesses, because you’ve seen almost one and half million jobs being created in new business, or businesses scaling up from being nought to 25 people up to being well north of 100 people over a five-year period.

“It is an incredibly important driver of our economy. But (innovation) it is also about existing businesses.

“I met all three of the CEOs of the Australian car manufacturing industry as it leaves the country... and we talked about the ‘why’ – and basically they said in a fragmented market we weren’t world class competitive. That’s the absolute heart of what we have to look at.

“If you are investing capital either in a small business or if you are part of a global firm, you’ll only have capital allocated if they believe our Australian operations will be world class competitive.

“In the end, nothing can hide from that ineluctable law of economics, you just have to be competitive.

“Our job as a government… is to help create the conditions by which Australian firms will have the best shot at being world class competitive.”

Mr Hunt said being more competitive in the business tax environment was one area government could help.

He said industrial relations was another area the Government was looking at, and he outlined two Government bills “which will improve the industrial relations environment within Australia. One is the Registered Organisations bill, and the second is in relation to the Australian Building and Construction Commission”.

“Both of these are simply about a level playing field,” he said.

The third area government could help was around free trade agreements, he said.

“The next wave of trade agreements (for Australia) include Europe and the Middle East, the UK and also India and Indonesia,” he said.

“At a moment when the world is pausing on free trade… we are trying to push ahead because we think there is actually a comparative advantage for Australia by pushing ahead.”

Watch State of the Nation 2016 videos.