In recent weeks we've witnessed the mixture of horror and hilarity that has greeted the Federal Opposition's release of its Knowledge Nation taskforce report, prepared under the intellectual stewardship of Barry Jones.

I have taken an interest in the reception of this report, because it, together with the Federal Government's $2.9 billion "Backing Australia's Ability" innovation statement, represent a seachange in our political debates.

It is unusual to see concerns with Australia's capabilities in science, innovation and education described as make or break election issues. Despite the commentaries that Knowledge Nation is a political misjudgement, the forceful and thoughtful retorts from several senior Government Ministers suggests that Australia's ability to capitalise on its inventiveness matters to ordinary Australians.

From a business perspective, we should welcome innovation and knowledge being on the political radar screen, but we must also recognise the blindspots from both the Government and Opposition.

Both concentrate on formal R&D and boosting and commercialising knowledge from universities and educational institutions as the key to Australia becoming a strong location for innovative and leading edge capabilities in both traditional and emerging industries.

Unfortunately, both parties underplay the reality that much business innovation comes about in response to new market demands and customer preferences. Similarly, the skills and knowledge required by business enterprises to compete in a fast changing market is less likely to come from the formal education sector alone than it is from collaborations with customers, suppliers and even competitors or from experimentation and improvisation by employees.

Witness the international success of Australia's wine industry, which derives from the industry's decision to tackle global markets, based on superior market intelligence and knowledge of consumer preferences, and reliable supply of high quality, premium product resulting from technical innovations in viticulture and wine making spread widely through the industry.

The question becomes one of how a nation creates, distributes and uses knowledge to build lasting capabilities and industries whose growth and productivity underpin the prosperity and living standards of its citizens.

That's where some recent work by the Australian Business Foundation on economic infrastructure comes in. We are engaged in a research project exploring how more imaginative and coherent approaches to infrastructure could boost the economic prosperity of three of Australia's established industrial regions, namely the Hunter, the Illawarra and Greater Western Sydney.

Our project takes a wide definition of infrastructure to cover the movement of not only goods, services, energy and people but also of information, ideas and data. The new angle we have factored in is knowledge infrastructure.

Business success tends to be characterised by the growing knowledge-intensity of industries where there is more value in intellectual capital, e.g. design, know-how of skilled workers and market and customer intelligence, than in plant and equipment and the physical means of production.

Therefore, information and telecommunications technology and knowledge and learning infrastructure become important elements to consider. There is a challenge to make the transition from the infrastructure investments of the industrial age to growth based on new intangible knowledge-based assets.

Infrastructure can be used to create critical mass and capability and to form new industry clusters, linked geographically or virtually, that secure a place in global markets and international value chains, by continually upgrading skills and tapping into new sources of learning.

We might just find that the Australian electorate is quite sophisticated in understanding that despite the rhetoric and the diagrams, using Australia's brain power and ingenuity is the only way to ensure our kids have jobs and that we can pay our way in the world.