The man set to become Australia's top public servant has a wake-up call for the nation: falling productivity means we are becoming dumber, and living standards will fall if we don't throw out regulatory, workplace and cultural brakes on growth and innovation. 
Martin Parkinson, expected to be the next secretary of the Department of Prime Minister and Cabinet, said Australia must boost innovation and address regulatory and industrial relations obstacles to growth or face falling living standards after the mining boom.
"Multi-factor productivity is about how smart we are in putting together labour, capital, land, ideas and yet in Australia multi-factor productivity is negative. So in other words, we're getting dumber each and every year," Mr Parkinson told the launch of Swinburne University's Centre for Transformative Innovation.
"Now I don't believe we are, but what it says is, as a society we are not recognising that some of the decisions we are taking in the regulatory space, the industrial relations space, maybe [in] the way in which we culturally think about innovation, we are doing things that are like an anchor around our ankle in terms of our capacity to boost future living standards."
Treasury has cut Australia's long-term rate of growth forecast after the mining boom, intensifying the Turnbull government's search for new drivers of growth such as competition reform, workplace change and a push to improve the poor rate at which ideas are turned into businesses.
Mr Parkinson, a former Treasury head, said boosting innovation requires a cultural shift to allow entrepreneurs to embrace risk. In other nations such as the United States, entrepreneurs who fail are more likely to have a chance of trying again.
"In Australia, if I fail, I have a big 'F' on the front of my head and no one would be prepared to let me have another go," Mr Parkinson said.
Prime Minister Malcolm Turnbull plans to release a sweeping innovation statement next month to forge more industry-research collaboration and boost the rate at which research ideas are turned into businesses.
On Friday the Victorian government will launch a $60 million innovation fund and outgoing chief scientist Ian Chubb will launch a report calling on the federal government to provide more support for research and development, more incentives for industry and research institutions to collaborate and a more stable policy environment to boost Australia's poor record of commercialisation. Chief among its recommendations is that the R&D tax incentive be tweaked to address one of the weakest links in innovation: the record of collaboration between industry and research institutions.
Scientific approach
How to make Australia more innovative
" Embrace risk, avoid fear of failure
" Tackle red tap, workplace and cultural
brakes on growth, innovation
" Fund more R&D directly and use R&D
tax incentive to boost industry-research
collaboration
" Create independent agency -
modelled on Innovate UK or
Sweden's VINNOVA - to make
innovation environment long term,
stable rather than ad hoc, opportunistic
SOURCE: FORMER TREASURY SECRETARY MARTIN PARKINSON / AUSTRALIAN COUNCIL OF LEARNED ACADEMIES