And it tells us something about Australia. Although Australia is making slower progress in allowing gay marriage, the argument over gay rights is pretty much over. Obama sent him to Canberra in the full knowledge that his sexuality would cause no concern in Australia. The advent of Berry, if anything, broadens the bandwidth of communication between the countries. ''I suspect I'm the first US ambassador to go to the Sydney Mardi Gras,'' he says. ''It was great, so refreshing to see everyone parading together. What a great example of Australians as a diverse, united group of people.'' But John Berry has much more to tell Australia about itself than the extent of its acceptance of gay people. After six months in the country, he has been powerfully struck by another feature of the place, one that Australians have trouble seeing.

''I see a dynamic, innovative, energetic population in every metropolitan area I've visited,'' he says, and that's just about all the capitals and many lesser centres so far. He speaks of impressive scientific research, innovation and growth opportunities, and a people good at solving problems: ''It's been exciting to see and to identify future sources of growth.'' Does Berry have the right country? It's certainly not evident in Australia's politics and media. Reporting and debate has been dominated for months by the sight of manufacturing failures and corporate panic, the sound of workers mourning their lost jobs and unions fuming over their lost membership. In response, consumer confidence, as you might expect, has fallen.

Is Berry just blathering, making it up to ingratiate himself in a new country? Where's his evidence? He enthuses over many examples and here are a couple. One he describes as ''almost miraculous''. He's been visiting brain research institutes as the US government chooses overseas partners for its 10-year brain research initiative. ''Australia has world leaders in this field, you have Nobel prizewinners,'' and the US wants to work with the best of them, he says. At the Queensland Brain Institute, Berry learnt how electric deep brain stimulation has been able to help people suffering from Parkinson's disease: ''The severe shaking of the hands is almost stopped, it's almost miraculous.'' A second example is research at the Australian Antarctic Division, a federal government base near Hobart that is Australia's jumping-off point for its Antarctic interests. Researchers have worked out how to breed krill, duplicating wild conditions, so they can study how the tiny crustaceans will respond to different conditions. Krill make up one of the basic feedstocks to sustain life on earth. ''It's harder to observe them in nature, so this is a phenomenal opportunity because scientists can modulate conditions - for example, what happens to krill populations if carbon concentration rises by 5 per cent?'' The US ambassador, inadvertently, is helping provide the antidote to Australia's creeping economic panic. And he's helping illuminate the missing piece of the federal government's economic narrative. The irresistible tide of events has seized the federal government's political and media agenda. It's taken it a long way downstream towards despair.

The car industry has not been viable for years but it just happened to fall to the Coalition to preside over its last rites. Events have conspired to put other troubling economic developments into the Abbott in-tray. So far, the government's response has been broadly right - but also inadequate. It's been right to deny public money to prop up failing corporations and decrepit industries. It's right to keep its commitment to prudently pare debt bequeathed it by Labor. But that can't be all. As the public mind is overpowered with frightening news of mass job losses, the federal government has to be able to offer more than cod liver oil and the stick. OK, federal ministers sometimes mention case studies of successful Australian entrepreneurship. Treasurer Joe Hockey has talked about his favourite, the digital movie production house Animal Logic. ''I reckon it is one of the great stories,'' Hockey said. ''It started in my electorate, Willoughby Road, Crows Nest, a good Armenian guy, Zareh Nalbandian. And I told this to the [Coalition] party room. He had 600 people work on The Lego Movie,'' a surprise hit that has so far grossed more than $US360 million worldwide.

Bill Ferris is an eminent figure in Australia, standing at the intersection of medical research and the financial markets. He's the chairman of one of the country's most successful investment firms, CHAMP Private Equity, and for 12 years was also the chairman of the cutting edge Garvan Institute for Medical Research in Sydney. He has his own favourites of Australian innovation but also a serious concern. His favourite successes? He points out well-known examples like Ian Frazer's development of the first cancer vaccine, for cervical cancer. But Ferris also likes to talk about two newer breakthroughs. One is a recent start-up company, Vaxxas from Queensland, that developed a clever nanopatch delivery system for various vaccines. ''So no needles, no temperature control issues for transport to and use in developing countries, just a small stick-on patch on the kid's arm,'' Ferris says. Second is a recent creation by Melbourne's Burnet Institute - a rapid, disposable test kit for HIV that can be bought around the world for $5 a test.

''These are breakthroughs that help many millions of people around the globe with big kudos and commercial pay-offs for Australia,'' Ferris says. Australia's strength in the health and medical fields is an unsung success. Health has been the biggest driver of job growth in Australia for a decade. ''Exports of biomedical devices and drugs and pharmaceuticals are already the biggest manufacturing export that we have,'' says Ferris, who's also a former chairman of Austrade. ''For many years they surpassed vehicles and specialised industrial equipment. Annual average growth has been 12 per cent for 20 years.'' His concern? When talking of Australia's national effort at research and development, or R&D, Ferris says: ''Australia has internationally competitive 'R', and bugger-all 'D'.''

This has long been recognised as the missing link in turning Australia's strengths in research into thriving companies. Most breakthrough ideas are bought by foreign firms, or taken abroad by inventors who can't find capital at home. One glaring mismatch is that Australian super funds have $1.6 trillion to invest, yet less than one half of 1 per cent is invested in start-up or venture capital to help smaller firms get started. ''So there's a huge opportunity for Australia in development,'' Ferris says. He was a member of a government advisory panel, the McKeon Review. One outcome: Ferris has presented Industry Minister Ian Macfarlane with a proposal for a $250 million investment fund to help transform promising biomedical research into successful new businesses. Ferris has lined up super funds to contribute half the money and wants the government to supply the other half. He would have no personal benefit. It would be a pilot in helping perhaps 20 start-ups get ideas from the lab to the marketplace. Macfarlane knows the market alone will not supply everything Australia needs if it is to have a thriving, sophisticated economic future.

He likes to point out how a modest $25 million in government seed capital for research into fibre composite technology with Boeing produced about $3 billion in orders for companies like Queensland's Wagners to supply high-tech aircraft materials. ''We will be looking for more opportunities like that,'' he tells me. Ferris' fund would be just such an opportunity. But with a harsh budget on the way, Hockey is in no mood to support new projects. ''I am worried that if the government and others think we don't have to act now, we will squander one of the few truly international intellectual property platforms we have in this country,'' Ferris says. Australia needs to develop products as well as research, profits as well as science. It takes a US ambassador to pierce the gloom and point out Australia's great strengths in innovation. And the Abbott government needs a positive story of promising Australian innovation and growth, not just the cod liver oil and sticks of national economic retrenchment. But does it have the wit to be able to do both?

Peter Hartcher is the political editor.