Episode 7: Innovation Systems - The Bigger Picture

What kind of “innovation systems” do we currently have for Australian agriculture?  

Well, according to a recent report commissioned by the Federal Government, it could be a lot better.  

The report found that while Australia’s agriculture research is internationally renowned and individual farmers are good at adopting new practices, knowledge is often siloed.  

Essentially, agricultural innovation in Australia was not designed to operate as a cohesive system, rather it’s made up of multiple institutions and organizations which have developed over time for various locations and commodities.  

So how do we change this?  

In this episode, we explore how we can work strategically to build an effective “innovation system”. From smart specialization, greater private sector participation to rethinking our water use, there is an opportunity to grow the total funding pool for Australian agriculture and be a global leader. 

GUESTS

Nicola Pero - CEO, Food and Fibre Gippsland  

David Downie – Strategic Advisor in Regional Development, Deakin University  

 
RESEARCH
Agricultural Innovation — A National Approach to Grow Australia’s Future Summary report March 2019

What is Smart Specialisation - European Commission

Global Agriculture Leadership Initiative - Australian Government, The Department of Agriculture, Fisheries and Forestry

This podcast has been created by the Victoria Drought Resilience Innovation and Adoption Hub and is funded through the Australian Government’s Future Drought Fund.

Transcript

Kirsten Diprose:

Innovation Ag is made on the lands of the Gunditjmara and Wurundjeri peoples. We acknowledge the traditional owners of country throughout Australia. We pay our respects to elders past, present, and emerging.

Nicola Pero:

We're transitioning from this linear economy to a circular economy, and that requires a different way of thinking.

David Downie:

People will grow what's convenient, but if the price of water reflected the cost of products and the cost of development, people would grow different things.

Kirsten Diprose:

Hello and welcome to Innovation Ag, brought to you by the Victoria Drought and Innovation Hub. I'm Kirsten Diprose. This episode is all about big picture thinking. While our previous episodes have focused more on individual or organisational advice for innovation, we're zooming right out to understand how innovation systems work on a large scale, so first, we ask what kind of innovation systems do we have here in Australia for agriculture at the moment? Well, according to a recent report commissioned by the Federal Government, it could be a lot better. The report found that while Australia's agriculture research is internationally renowned and individual farmers are good at adopting new practises, knowledge is often siloed. So how do we change this? From smart specialisation to cross-industry collaboration, to rethinking our water use. We even discuss a Big Australia. All ideas are on the table, and our two guests have essentially spent most of their careers thinking big and then joining the dots.

Quite literally for David Downie, who played a key role in designing Victoria's water grid and is now a strategic advisor on regional development at Deakin University. You might remember him, actually, from Episode Four on value adding. But first, let's hear from Nicola Pero, the chief executive of Food & Fibre Gippsland, which is also a partner in the Vic Hub. This organisation is essentially a regional innovation system in itself. Nicola says years spent working overseas has helped to find different approaches to challenges.

Nicola Pero:

When I returned to Australia, I worked for a large regional council in the middle of Outback Queensland. I then moved to Gippsland to take up a role that was economic development. It was CEO of an establishment called Lardner Park, who also host the largest field day event in Victoria. I'm a strong community contributor, so I got involved in Agribusiness Gippsland, and a few years later, we amalgamated Agribusiness Gippsland with East Gippsland Food Cluster, and that was the birth of Food & Fibre Gippsland. The reason for that was to bring those voices together so that they were unified across a very large region encompassing six different shires.

Kirsten Diprose:

So you were really involved in the beginnings of Food & Fibre Gippsland?

Nicola Pero:

Yes, absolutely. I was actually on the board of Food & Fibre Gippsland, and I stepped off the board in 2020, in fact, four days before the first lockdown, to take up the role as CEO and just establish our strategy and how we were engaging and working with federal, state and local government, and representing the interests of the food and fibre industry. Perhaps I could just clarify because a lot of people will say, "Oh, Food & Fibre Gippsland, so you work with farmers in agriculture." The answer to that question is yes. However, we're the peak body for what we term as a value chain, and it's a very different way of thinking. Agriculture, forestry, and fishing is a vertical pillar, if you like, within that value chain. If you think of everything that comes from land and sea and ends up on a plate somewhere in the world, we represent what happens between those two points.

Kirsten Diprose:

It's worth noting that Gippsland in Victoria's east has a $7 billion regional output in food and fibre. It's also a region which is in the middle of a major transition in both renewable energy and forestry which, in turn, is having an impact for farmers and agriculture along the value chain. Nicola says it's in this disrupted environment that there's a huge opportunity for innovation, not so much through tech, but collaboration.

Nicola Pero:

If you think of seeds and soils, to growers, makers, producers, to manufacturing and processing, supply chains, be they domestic or export, climate impact and adaption, agritourism, provenance, technology platforms, workforce, hospitality, we represent work and engage and advocate across all of those things there.

Kirsten Diprose:

It's slightly different to some of our other people involved in the Vic Hub, so obviously, Food & Fibre Gippsland is the southeast node of the Vic Drought and Innovation Hub, and we're made up of farmer groups as well as industry groups and you probably fall more into that category of industry group. Is that right?

Nicola Pero:

I think that will be a fair comment, and I think they just come also from some natural evolution and a lot of the transition work that is occurring in the Gippsland region in both areas such as forestry and renewable energy, both of which have an impact on what we're talking about today, and on the core focus of agriculture, if you like. That natural evolution has come about again, by a way of systems-thinking, but also the external forces that I think are driving and impacting everybody now.

When you think about traceability and reporting on traceability as an example, you can't just look at pre-farm-gate. We have to connect the stakeholders and the actors and players, be they academia, government, industry or community right across that, so farmers need to understand the challenges and the opportunities and engaging with the manufacturing and processing sector. They need to understand what's happening on the export level and coming back the other way, the same applies. Social licence is driving the need to understand right across that value chain.

Kirsten Diprose:

Tell me about the term innovation ecosystems. Ecosystem is traditionally a word reserved for biology and the natural environment. Why is it something that we're starting to see crop up in agriculture and other industries?

Nicola Pero:

Look, Food & Fibre Gippsland has had a lot of support since its amalgamation into Food & Fibre Gippsland from FIAL, Food Innovation Australia Limited, as a cluster, so we were one of the four original clusters around the nation that was supported with an intelligence and expertise and experience, and all of those sorts of things and funding, through FIAL, and clusters are an ecosystem in themselves. Clusters are a way of working. Clusters are a way to bring similar businesses together to collaborate in order to drive innovation and achieve outcomes.

But what happens when you take one cluster from one area and say, let's call it agriculture, and then a cluster from energy and a cluster from environment, and you start to bring those together, it doesn't sound right if you start calling them a cluster of clusters, and so what they form together is an ecosystem. Circular economy is an ecosystem, so I think language informs and influences how we think, how we speak, how we engage, so we need to start using the words that reflect what it is. What we're doing is we're building ecosystems to drive innovation but bring together the power of more to achieve efficiency and effectiveness.

Kirsten Diprose:

Food & Fibre Gippsland is really a great example of what we're talking about now, which is these kind of innovation ecosystems and thinking bigger picture. I thought it was really interesting that you mentioned that you'd worked overseas and been able to be influenced by what you've seen overseas. How does Australia compare in terms of how we're set up for agriculture with other developed nations?

Nicola Pero:

I think we're set up well and we also have a lot of opportunity to move forward very quickly by way of collaboration. If you look at areas such as Europe, driven by need, their culture drives collaboration and sharing of practise and sharing of information and all of those sorts of things a lot stronger than what we perhaps are necessarily used to in Australia. I personally am a big advocator for encouraging people to collaborate and work together to build a bigger pie instead of focusing on what the size of the slice is. Similar adage, rising tide floats all boats. We need to work harder at working together. It mitigates or reduces the exposure to investment cost, it allows broader adoption of technology because peer review is so important, it shares education better. There are so many opportunities, but we do need to collaborate in a deep way.

Kirsten Diprose:

That's essentially what that report, it's called Agricultural Innovation - a National Approach to Grow Australia's Future, found. The report says that agriculture innovation in Australia was not designed to operate as a cohesive system. Rather it's made up of multiple institutions and organisations which have developed over time and are focused on various locations and commodities, and this is limiting innovation investments.

Nicola Pero:

When you put on top of that, the layer of we're transitioning from this linear economy to a circular economy and that requires a different way of thinking. We can see it even in a political context when we look at it on a state base moving to Department of Energy, Environment and Climate Action. All of a sudden now, we used to talk about agriculture, but now we also need to think and talk about, even though they weren't considered before, but the environmental aspects, the energy aspects, so that circular economy is driving all of this to be able to think across multiple sectors and engage across multiple sectors.

Kirsten Diprose:

What do you mean by circular economy? We're actually talking about circular economies in an upcoming podcast episode, but on a smaller scale, how you might incorporate it on your farm or in your industry, what does it mean to talk about circular economies at a regional or even national level?

Nicola Pero:

I think what it means is really taking a cascading approach because you're right, circular economy is at a national level, so you're hearing an awful lot about sovereign manufacturing as an example, so that's one element that will help to drive circular economy. Everybody is focused on emissions reduction, reducing carbon footprint. That means looking at more closely connected input resources and actions and activities within that.

Gippsland as an example, has always been a master of primary production and it hasn't been all that we've done, but we have been exposed a lot to moving those primary production outputs out of the region to be value added somewhere else, and more often than not, then coming back into the region to be sold. A lot of carbon miles get gobbled up in that, so how do we build these smaller, more localised circular economy systems? How do they connect on a regional basis? Then regionally, how do all of those connect on a state basis? And the same going up to a national basis, so that connectivity, but it's more about the methodology and the way of thinking in order to be able to achieve that.

I think what you're going to see is a lot more innovation in small new businesses. A prime example is we've lost a lot of our repair skills because we've come out of this linear economy that is all about buy cheap, consume, throw away. That's a very different way of thinking and working when you start to move to a circular economy, which is about how do you design those resources and design everything to stay in the system for a lot longer, to be more easily replaceable, to be more easily recycled? It's about designing waste out. When we talk about designing waste out of a system, that's very core to what we're talking about here, whether it's in food production waste within the system, whether it's in packaging waste, there's a huge amount of opportunity for us to capitalise on innovation, new R&D that will help tighten up that circular economy within our sectors.

Kirsten Diprose:

Have you got any examples, perhaps from Gippsland where you can really demonstrate how a particular industry or group is doing that, is making a circular economy at that larger scale?

Nicola Pero:

I think you've got some different components in here. You've got methodologies and way of working and then you've got actions and outputs, and I think we're getting close to the actions and outputs in looking at smaller, tighter systems and looking at how product is distributed in a regional sense. But I want to just touch on methodologies and way of working for a moment because Gippsland has a really unique opportunity in that through the Victorian State Government, we are the only strategic partner to the European Union on a methodology called Smart Specialisation. I won't dive too deep into that, but I will touch on a couple of fairly important points. The European Union will only fund member country major developments if they have been through Smart Specialisation. Smart Specialisation is a methodology of looking at explore, discover, define, develop, deliver, but most importantly, it's about bringing quadruple helix engagement to the table right at the very, very start of that process.

When I talk about Q4 or quadruple helix engagement, I'm talking about academia, government, industry and community, and we have to have those four voices because they all bring a different view. We need government at the table because that's the regulatory and the policy levers that can support and grant funding, that can stimulate that economic development and early seed funding, et cetera. You've got academia because we need R&D, we're moving into such a new world that we need that R&D support. We need community because social licence now is a powerful and valuable and very influencing perspective on everything that we do. And industry, I would hope that's self-explaining. Industry is the engine. It's what's going to drive us there. Having those four voices working together, we are undertaking, as an example, a lot of competitive regional advantage work using Smart Specialisation.

We have created a new circular economy malting industry with industry partners here in Gippsland. A lot of malt for the craft brewing industry is imported into the country, a lot comes out of New Zealand. From a provenance perspective, we should be producing a lot more of our own for that brewing industry, especially in Victoria where our artisan and craft brewing is really leading the nation. Seaweed. Gippsland has more coastline and waterways than almost any other region in Australia, so we're looking at integrated supply chains for seaweed. I talk very much about integrated supply chains because again, you don't want to just grow things. For seaweed, that's about hatcheries, growing, harvesting, processing, manufacturing.

We're doing the same work in industrial hemp fibre. We're doing the same work in vertical farming and the same work in insect farming. It has really helped having all of those voices at the table, especially from a government perspective. You can get a long way along the feasibility and analysis trail and then find you have got blockers from a policy or a regulatory framework. That's really hard to shift that if all of a sudden, you've just arrived and now you're trying to have that conversation. If they are in the conversation from the very start, we're finding it is really disrupting and changing the outcomes that we're getting.

Kirsten Diprose:

Wow. You don't usually hear policy and disruption in the same sentence. You mentioned earlier about getting all the voices in the room, and another one which Australia has really struggled to do effectively is making sure we have First Nations peoples and their views and knowledge. How do we better involve our Indigenous people?

Nicola Pero:

Through always having it front and centre. I'd like to think that in our neck of the woods, we do this almost naturally because straight away, our local First Nations groups are on the radar as an important stakeholder. We engage with them on board levels. We engage with them in workshops. I think it's just the commitment to consistently be including in that conversation, including in that development pathway.

You look at things like seaweed in Gippsland as an example, that's got considerations and opportunities and challenges for First Nations, and so how do we contribute what's needed without trying to take over that supply chain? I certainly know with GLWAC, the Gunaikurnai Land and Waters Corporation here in Gippsland, we provided some contribution around assisting in development of traditional foods business plan, which they now have well and truly in action and are delivering and they have a supply chain through their onsite cafe, but their eyes are set on Melbourne restaurants and then potential export markets. We don't need to be involved in all of that, but we can facilitate with introductions, we can connect in the supply chain, so again, collaborative, sharing of information.

Kirsten Diprose:

I wanted to go back to seaweed because I think seaweed's a really interesting industry that Gippsland's obviously got a leadership role in. It's interesting because it's quite a new industry and in terms of an innovation ecosystem, you almost can start things from scratch and of course, seaweed can be a food, it can also be a carbon sink. It's kind of really exciting.

Nicola Pero:

You're absolutely right. We just finished a six-month study with Deakin University who of course, are the university partners in the Drought Hub and the Ag Innovation Hub. That specifically has looked at the better and recommended growing locations and species. A lot of people are focused on Asparagopsis and what it can do to reduce methane emissions with livestock, with cattle, great focus. Our focus is a little broader and it's really on looking at what can we grow within that? Where is it best grown, and then what's the hierarchy of needs? What can actually drive regional competitive advantage?

You're right, it can be food, it can go into the nutraceutical industry, it can go into the pharmaceutical industry. Seaweed is used to create materials for burn patients. It can be used in energy. It can be used in livestock feed as we said before. And yes, you're right about carbon sinks. Seaweed, sequesters carbon at about 20 to 25 times above ground forests. It rehabilitates fish stocks and marine areas. There is potential to look at, and Gippsland is a good example. There is potential to start looking at things like can the infrastructure of offshore wind support deeper sea kelp growth? Again, now we're looking at cross-sector collaboration. We do tend to push very much in Gippsland that in the hierarchy of needs, food production must come first.

Kirsten Diprose:

Yeah, the potential for seaweed is certainly out there, but the amount of money that it's bringing in right now is relatively small compared to what milk or beef would be bringing in, for instance, in your region.

Nicola Pero:

Absolutely. But any new or complementary areas have got to start somewhere, so what are those ones that are going to garner more momentum more quickly, have got a broader spectrum of uses? Insects. Insect farming is very new, but it's a really interesting approach to things like biological approach to waste management. Ultimately, insects provide one of the most condensed and concise ways to consume protein, but it's never going to be a case of one over another, or traditional protein versus new protein. Our protein consumption in the world has doubled since the year 2000. It's going to double quickly again, so I don't think that there is ever a case of competition, perhaps coopetition a little bit, but these are complementary of each other.

Kirsten Diprose:

It's certainly a shift in thinking to see commodities and industries as being complementary rather than in competition. But when you're thinking more in terms of a system where every part has a role to play in creating a whole, it makes much more sense. David Downie has been thinking about water and land use like this for decades. He was a senior Victorian water advisor and is now at Deakin Uni's Centre for Rural and Regional Futures.

David Downie:

In the late '80s, early '90s, I was the director general of water resources in Victoria at a time when water was becoming a more preeminent issue, policy issue, so there were major changes in water policy in Victoria and in the rest of Australia, leading into national water initiatives later on. There was a big change in water then, as we thought about how we allocated water and how we used it. I was also head of energy and minerals in the Kennett government era. I came back to government in the early 2000s in the role as General Manager of the Office of Water in Victoria again, similar to my role in the late '80s. That was of course, the period of the drought. At that time, the intersection between water and agriculture became even more apparent and I remember politicians saying to me, "What's the problem with water policy?" I can recall saying, "It's not a water policy problem, it's an agricultural policy problem." They'd say, "Why is that?" And I'd say, "Well, because we've got plenty of water, might be in the wrong places, but we use so much of it on agriculture that produces so little."

For example, if you were in the water industry in my time then, you'd make an observation that the people who called for drought subsidies were really people that had farms not near water infrastructure. Even when the drought of 2006 came along, which was very dry, probably the driest year in a hundred years of Australian history at that time, it was actually the driest year, there was over 3,000 gigaliters of water in the Murray-Darling Basin. There was water in different areas. But given the way we used water in agriculture, there wasn't enough water for the people that were traditionally doing what they do.

For example, in the Murray-Darling Basin, 70% of the water is used on rice, cotton and dairy. Despite that, the GDP growth in the regions in Australia and the Murray-Darling Basin in particular is very low. It's around the naught to 1% area, so there's not a lot of economic gain out of using all that water.

Then when I left the government, I've been involved in Deakin with regional development because after all that experience in dealing with the issues in regions and agriculture and water and energy, it was very clear that regional growth in Australia was about naught percent. The capital cities are growing at 3.5%. That's well-known and understood. A huge percentage of our population is in the capital cities, hardly any in the regions. When you look at that, it's because we have two main industries in the regions. One's mining where most of the money is made by people who fly in and out and then there's agriculture, and agriculture in Australia is also running along at about naught percent growth, maybe a little bit more in some places. In the last couple of years, we've had significant increase in agricultural production because the weather conditions have been better.

But if you look at agriculture over a hundred, 150 years, it's been a primary producer mainly, almost exclusively cereals, grains, rice, cotton, dairy, et cetera and a price taker in international markets, as well as in our own markets, so the growth in revenue has been very low. Regional growth is very low, and then that means governments are reluctant to invest in infrastructure in the regions because there isn't the population there. It means that the private sector doesn't invest much in regions. In Deakin, we started to do a lot of work on what could change that? What can change that is looking at what the natural advantages are in those regions. There are many, and I'll get to say it probably differently throughout this interview, there is actually plenty of water.

Kirsten Diprose:

It's interesting to hear you say that because while there's plenty of water around right now as we're doing this interview and this last couple of years, if you asked, I think someone on the street, does Australia have a lot of water? I think the answer would be no. We're a dry country. We're semi-arid.

David Downie:

That's right, and I understand why they say that because there's vast tracks of land where there's very low rainfall, but that's always been the case. But there are also very large tracks where there are plenty of water. There are also the whole coastline of Australia's thousands of, I think 25,000 kilometres. There's a massive ocean there. There's a massive amount of water there that's an access point. There's a lot of underground water that we're not currently using. A lot of the reason why we don't use water that's available is because it costs too much to use it in low-value primary produce.

For example, if water's priced at more than $100 to $200 a megaliter, then it's very difficult to make a profit out of rice or cotton and it's approaching difficulty in dairy. But if you're growing vegetables, the price of water at six to $8,000 a megaliter is not an obstacle because that's the value you can extract from vegetables. We've got all this agriculture focusing on areas where we need a lot of water, despite the fact we've got large areas that are dry, I understand that, but we still use a lot of water to make products that are not that valuable.

Kirsten Diprose:

What you're saying is quite controversial, and I know you're coming at it from a purely economic perspective, but if you're a rice grower, a cotton grower, you're in irrigated dairy, what you're saying is not nice. You are saying it's a low-value product.

David Downie:

As it is, but I draw a number of comparisons. There are people that grow dairy, for example, milk cows, but there's a lot of money in yoghurt or cheese if it's done in the right way. When you go to the, say, the Victorian Markets, and you ask the producers there, how much of your cheese is Australian? The answer's usually about 20% or 30% only is Australian, and yet we're proud of our dairy production, so why aren't we making the products that have the value? When you ask those producers, why haven't you got more Australian cheese? They say, "Oh, well, the customers don't like it as much as international offerings, it's expensive and it's not reliable," or any combination of those three reasons.

What we've done is we've inherited this 18th to 19th century tradition of growing low-value agriculture because it's been easy, hasn't needed a lot of capital. We can settle in places. We gave away lots of land, we gave away the water cheaply, so naturally, we develop industries that are reliant on the continuation of those cheap inputs. Many of the dams that are being built, and you can still hear the conversation that people need to build more dams, and that's all in theory going to be paid for by the taxpayer. What that encourages is low-value agriculture because then, people will grow what's convenient. But if the price of water reflected the cost of products and the cost of development, people would grow different things. They have to grow different things.

Kirsten Diprose:

This one I know can be another controversial thought or idea, and look, you come at this again as an economist, but you mentioned about how there are farms in Australia that perhaps shouldn't be where they are or the resources aren't there. Water is somewhat movable. Are we using water in the way that we should be? Can we think about it differently? Is the system of allocations correct?

David Downie:

That's a complicated question, but I'm speaking as someone who is one of the two or three people responsible for creating the water grid in Victoria. So, let me say if you drink water in Victoria at the moment because of the desal plant, which is connected into Melbourne, because of the north-south pipe, which was politically unpopular, that's connected into Goulburn and then into the Murray River because of the Rocklands Reservoir that connects southern parts of Western Victoria and the Wimmera Mallee Pipeline, because of the Superpipe, I think they call it into Ballarat and Bendigo, nearly 95% of Victoria's population can get drinking water because of that grid. Yes, there's a huge opportunity because water doesn't fall where the populations are to connect it up. Historically, people have considered that transport of water has been too expensive, but that's not really the case now, and the value of water is so high because you can't live without it, that we need to do it.

The Snowy Mountains Scheme that produces so much water for the Murray-Darling Basin, a lot of the water ends up in South Australia, if you know it, and there's a big argument about the allocation of water and the environment, and there's a big distribution system about water in the Murray-Darling Basin with all states sharing of resources. But there's more opportunity to move the water around. There's more opportunity to capture water in different parts of Australia and transport it. Because of our low population at this stage, some of that wouldn't be economic. For example, the Bradfield Scheme. If you could capture a lot of water in Northern Queensland and to bring it down to New South Wales and Victoria for production purposes, the cost would be astronomical and wouldn't pay for itself.

Kirsten Diprose:

What if we had more people here? You might remember when in 2009 then Prime Minister Kevin Rudd floated the idea of a Big Australia. The idea didn't really take off.

David Downie:

Well, the population debate in Australia is a massive one, and I'm not basing my views on my work experience directly because I'm not entitled to make those observations. But I think given what's happened with Australian manufacturing industry and the question of scale and investment, the existing shortages we're having in manpower and labour skills, et cetera, across the board, the immigration debate, et cetera, Australia's going to have to grow dramatically become independent, and it hasn't needed a Ukraine war or the other developments around the insecurity in the Southeast Asian area, Taiwan, China, et cetera to drive home to us that we're going to have to become more and more independent. It means we're going to have to manufacture more. It means we're going to have to be much bigger because at the moment, we lack scale to put a lot of industries in place. We could do it if we exported a lot more, but it's very hard to do a worthwhile contract with a major international player if you are saying, "Oh, I have 2,000 Mazdas," instead of 200,000 Mazdas, and you want them to take heaps of other things.

Yes, we're doing well with exporting these primary products, coal and gas, but as I said, there are a lot of weaknesses in that long term. I think a bigger population where we grow bigger industries, at bigger scale, more highly skilled, we use the land and water better will grow the regional towns because the infrastructure will come in with it and then there'll be better schools, there'll be better restaurants. The immigration surge will bring in a diversity of cultures and skills and attitudes and entertainment and recreation and a whole lot of other things, so I see that as essential for the future of an Australia that's independent and free in the future over the long term.

Kirsten Diprose:

Specifically in Victoria, we have a lot of dairy in the southwest and in Gippsland because it's a high rainfall area. You mentioned dairy as being low value, but what does that mean? I mean, should we be doing dairy in those regions?

David Downie:

Well, it's up to the farmers of course, but if you're looking at economic return, the dollars earned from the land and water is low. That's all I'm saying, relative to other opportunities. I'll give you an example. Werribee Irrigation District just west of Melbourne is 2,300 hectares under vegetables, just 2,300 hectares, uses only 15 gigaliters of water produces $240 million worth of vegetables. Now, two or three cotton farms in New South Wales would use at least that amount of water, maybe produce a couple of million, two or $3 million worth of cotton on vast tracks of land, hundreds of hectares.

In the dairy area of the southwest, one of the better dairy areas in Australia along with Gippsland and obviously Tasmania, yes, there's significant amount of investment in dairy, but the rate of growth in those areas is very low economically. In fact, it's one of the slowest growing areas of Victoria despite that. I'm not criticising individual dairy farmers who are making money, and there are many who are making good money and that's why they stay there. But from a broader Australian and Victorian perspective, we need industries that are going to create more value out of those resources. That's what I'm saying, so therefore, we've got to think of ways of encouraging them to moving into higher value produce.

Kirsten Diprose:

David's clearly a big picture strategic thinker, and there's always been a tension between what makes macroeconomic sense and what local communities or individuals want in terms of their land and water use. But to deliver large-scale change, there generally needs to be local level buy-in. Let's take for instance, David's point about getting more value for the products we produce in Australia. How do you actually do that at scale when there are so many small and medium businesses to bring in? Well, going back to Gippsland, Nicola Pero says a key way to develop stronger innovation systems is to enhance provenance.

Nicola Pero:

Is there more opportunity in developing stronger and more connected ecosystems amongst those small and medium enterprises so that together they are larger? Consolidated export, so when you look at regions like Gippsland, for instance, we have really large operators, producers and growers, but we also have a lot of smaller ones as well, so how do we consolidate amongst those smaller ones to capitalise on export opportunities, which we're currently doing at the moment?

Kirsten Diprose:

Yeah. Can you tell me a bit about that? How do you do that? How do you get people together? How do you make it something tangible?

Nicola Pero:

A lot of blood, sweat and tears, because at the end of the day, someone has to be the facilitator, the coordinator, the driver. It's that resourcing, and that often falls back into the not-for-profit area or peak bodies to be able to drive. When you think about it, a lot of those smaller enterprises, they're the ones who find it hardest to pilot, trial technology, to adopt technology, to invest in technology, so being able to share that exposure and risk and do it together forms a really core part of that collaboration. But sometimes to be able to collaborate, you actually need a facilitator. You need someone who's going to help bring all of that together, help drive it together, because one individual in a business is usually a very busy person.

Kirsten Diprose:

Yes. What I'm really liking about this conversation is because we're talking about, okay, how do we make this happen? These innovation ecosystems happen on a national level and it keeps winding back to a local level.

Nicola Pero:

Yes. Look, it does. You mentioned before provenance. Even if we look at a branding perspective, that's still cascading. It cascades as a 'Made in Australia' level. But when you bring it right down to a regional level, we've actually just introduced, and we're rolling out now a new brand called Gippsland Trusted Provenance, so it's a GTP branding. It actually has a similar look and feel to the visitor economy branding, and we have done that so that we can crosspollinate between visitors that come to the region and then later on are shopping at the supermarket or vice versa.

But most importantly, we're finding the take-up and the interest in the appetite from markets overseas from a buying perspective is really, really strong. They are looking for, obviously there's different export markets, but the markets that we're dealing with at the moment are more those, they're looking for exclusivity, they are prepared to pay a premium. The story behind provenance, the ability to brand it, the ability to support it with video material and that sort of thing, people can see and they go, "Gippsland is clean, green, and trusted." When you look at digital systems and traceability, that's all fantastic, but to really drive that in a sales perspective, it needs front end wrapping. It needs branding to it, and so for us, that's what Gippsland Trusted Providence is about.

Kirsten Diprose:

Going back to the point you made earlier about getting all of those different people in the room, industry research and policymakers, government, in the Australian landscape, the startup venture capital industry is quite new to Australia. Where do they sit in that ecosystem?

Nicola Pero:

Really, really important positioning for them. Australia has enjoyed for a long time a very lucrative agriculture world, if you like. I think now, we're just starting to, and I will say, play a bit of catch-up on the need for technology and how we can drive that technology adoption faster, et cetera. There's a lot of support there for startups and R&D in that sector, and that should continue to grow. But well over 92% of businesses in Australia, Australian businesses, well over 92% have employed less than 20 people and have less than $2 million turnover, so I think we also need to remember that we have an enormous opportunity in supporting and helping our S's become M's and our M'S become E's. How do we shift and grow businesses that are already operating that have got a long-term operational model that are already employing workforce that could really benefit from digital skilling and technology adoption to drive expansion within what they already do really well?

Kirsten Diprose:

Our next podcast episode will be about innovation ecosystems on a local level, specifically looking at climate adaptation, which is what our recent Think Tank event, which we held in Bendigo in March, was all about. I wanted to ask you you just a bit about climate adaptation and how that innovation ecosystem on a larger scale, can support climate adaptation, which is a relatively new concept that we're beginning to talk about. We've been talking about climate mitigation for a long time, reducing greenhouse gases, but now going, okay, we need to face a world in which climate change is a reality. We're living it now. How do we mitigate but also live with a hotter, drier environment?

Nicola Pero:

I do feel that for some time, we're all going to have to walk almost with a foot in two worlds because there's a need to diversify, but you don't want to throw out one to replace with another. There's that balance of not knowing quite which way things are going to go. That delivers an opportunity for many farmers, many producers and growers to consider diversification opportunities, to consider adding to their business things like an agritourism piece of it, things like on-farm circular economy systems, so start to think about their energy needs. I mean, farmers are already doing this, but I think what we're doing is driving it really front and centre. Things like industrial hemp fibre. Again, very much about putting carbon back into the soils, very much about carbon sequestration, about finding alternative materials for construction industry and the textile industry. Seaweed is the same. These are all being driven by climate exposure, climate risk.

David Downie:

Innovation is really a much overused word, but that's what we need in this space. Australia is facing a lot of headwinds. We really need to change. I probably don't need to outline those headlines, they're pretty obvious, but we've relied on mining, coal and gas, bringing huge amounts of revenue that support our social systems, et cetera, et cetera. That's going to change. The other thing that I haven't mentioned is the availability of huge amounts of renewable energy at low cost that almost no other OECD country can offer. The combination of water, land and energy to me are the three ingredients that we need for massive food outputs. Yes, we can do it, but we're going to have to change our thinking. That's my optimistic hope.

Kirsten Diprose:

That's it for this episode of Innovation Ag. But wait, there's more. This episode on innovation systems is really part one of a two-part series, so we just explored innovation systems on a large scale. Our next episode, we will look at innovation systems on a local scale. As Nicola said, it all cascades into the bigger picture. And to do this, we'll be drawing upon speakers from our recent Think Tank event in Bendigo called Are We Drought Ready? where we looked at local responses to climate adaptation. I can't wait to bring you some of those highlights.

Thank you to our guests for this episode, Nicola Pero, the Chief Executive of Food & Fibre Gippsland, which is also part of the Vic Hub. It's our southeast node. And David Downie, Strategic Advisor in Regional Development at Deakin University. And Deakin is also a partner in the Hub. You can find the episode transcript on our website, vicdroughthub.org.au. Thank you for listening. This episode is written and hosted by me, Kirsten Diprose, produced by Rachael Thompson and we have editorial input from scientists, academics, and farming groups involved in the Victoria Drought and Innovation Hub. This podcast is funded by the Australian Government's Future Drought Fund. Catch you next time.