A new independent report, "Ambitious Australia," has concluded that Australia's research and innovation system is "broken" and requires "bold reform." Commissioned by the federal government in December 2024 and led by Tesla chairwoman Robyn Denholm, the report is the outcome of a strategic examination of research and development in Australia. This report follows a history of similar reviews dating back to the 1980s and '90s.
Australia's research and innovation system is "broken" and requires "bold reform," according to the new independent report "Ambitious Australia."
Diagnosing the Problem
Historically, public spending on science and innovation during the Hawke-Keating era led to a significant boost in Australia's high-value exports and productivity growth above the OECD average. However, the new report indicates that Australia has since fallen behind its peers.
Key issues identified include:
- Australia's manufacturing as a share of gross domestic product (GDP) is the lowest among developed OECD economies.
- Spending on research and development (R&D) in Australia was 1.69% of GDP in 2023–24, down from a peak of 2.24% in 2008-09, placing it among the lowest in the OECD.
- Between 2010 and 2020, Australia's productivity growth was its weakest in six decades.
The report suggests that the decline in manufacturing, where businesses typically make substantial R&D commitments, correlates with the decrease in innovation spending. It also argues that Australia's economic focus on resources exports, driven by the concept of comparative advantage, has overshadowed the development of high-value manufacturing.
Review Objectives and Recommendations
The review had two primary objectives:
- To reconstruct Australia's research and innovation system, including support for foundational "blue sky" research.
- To ensure the system supports broader industrial policy aimed at building new competitive advantages in global markets.
Following extensive consultation, the report proposes a comprehensive "plan for action" with 20 recommendations. These include:
- Better support for foundational research.
- Consolidation of fragmented research and innovation programs.
- Changes in incentive structures for business research and development.
- Improved startup and early-stage financing.
- Embedding research and development in public procurement.
The report also calls for the establishment of a new national innovation council to set priorities and coordinate efforts across six innovation "pillars": health and medical, agriculture and food, defence, environment and energy, resources, and technology. This structure aims to promote collaboration between government, business, investors, and researchers on "high-risk, high-impact" challenges.
Potential Drawbacks and Gaps
The report's proposed bureaucratic structure, while well-intentioned, could create complexities that hinder industry involvement. Alternative models, such as collaborative research and innovation hubs found in Germany, the UK, and the US (e.g., UK Catapult centres), were suggested in various submissions.
Identified gaps in the report include:
- No assessment of whether the current R&D tax incentive offers better value than direct targeted funding.
- Lack of focus on management's role in improving productivity by engaging workforces and facilitating the adoption of new technology.
- Limited discussion on the vital role of Australia's regions in the research and innovation system, particularly concerning energy transition and economic diversification, though a separate government report addresses some of these regional aspects.
Next Steps
Given the federal government's vision for a "Future Made in Australia," the report's recommendations are considered timely. The immediate challenge involves reviewing and integrating the report's findings in preparation for the 2027 federal budget and ensuring that strategic intent translates into transformative actions.