The impacts of the current financial crisis on R&D

Guest post by MJA Manager Ian Ross-Gowan

Conventional wisdom would presume that the current financial crisis will have a negative impact on R&D. This would be especially so if the result is a sustained deep recession or ongoing tight access to financing funds. Indeed, Dr Terry Cutler in an interview with SmartCompany on the 10 November 2008 indicated anecdotally that the availability of funds from banks for technology start-ups is very tight – and this was already problematic with the cancellation of Commercial Ready Grants. But is it all doom and gloom?

As a result of the longest period of continual growth in our history the Australian economy was hitting three significant constraints

• attracting and retaining staff,
• capacity to supply and
• the high Australian dollar.

Attracting and Retaining Staff
One of the impacts of the uncertainty in the world’s economy is that staff should be easier to attract and retain. There will be less competition for staff with the reduction in opportunities and poaching of staff should reduce as businesses focus on costs and business sustainability.

Easing Supply Constraints

Capacity constraints should ease. This would be accompanied by lower turnover but it could also ease high marginal costs of inputs. From a researcher’s perspective it could also mean an increase in the availability of production facility and production staff time to focus on issues other than trying to keep up with demand. This could give researchers the time to focus on future product or process improvements that have been needed to be put off.

Lower Australian Dollar
The reduction in the Australian Dollar will give a boost to exports assuming the rest of the world is able to buy. The high Australian dollar was largely driven by increases in commodity prices. Businesses not involved with the export of these have been suffering from the high dollar. Import prices were low and the price to export customers high. It is not just the exporter who can benefit from the lower dollar; domestic manufacturers who supply Australia should be advantaged as well.

Finally it may be worthwhile remembering that a downturn can refocus a business with R&D leading the way to that business’ brighter future. With the downturn in the typewriter market and little prospect of future growth in the mid 20th century, one company refocused their business on managing information with new technologies. That company was IBM.