Moreover, Australia spends just 0.89 percent of its gross domestic product (GDP) on R&D—notably lower than that of the United States, which sits at 1.72 percent. This is very low compared to the OECD average, which is 1.99 percent. This difference results in a shocking $32.5 billion funding gap. Experts and industry leaders are hugely worried about the major long-term consequences this will have on the nation’s economic health and innovation capacity.
So we commend the Australian Academy of Science for shining a bright light on this important sector. They argue that the business sector’s chronic underinvestment has greatly deepened that gap over the years. Alarmingly, federal investment in R&D has been on the decline over the last decade, leading to increasing demands for immediate action to reverse this trend. With Australia spending a third less than similar countries invest on R&D, the need for Australia to reform its system has been felt more urgently than ever before.
Anna-Maria Arabia, chief executive of the Australian Academy of Science, remarked on the current state of affairs:
“Our back is up against a wall now.”
She urged stakeholders to recognize the pressing need for increased investment to foster innovation and maintain competitiveness in a rapidly evolving global landscape.
The Call for Business Investment
The Australian Industry Group (Ai Group) has taken a proactive stance, advocating for a radical overhaul of R&D funding strategies. Ai Group chief executive Innes Willox highlighted the urgent need for more private sector investment in R&D. Without this investment, he said, the future of Australia’s economy is in jeopardy. He stated:
“R&D investment is not merely an academic exercise but a crucial driver of national prosperity.”
Ai Group has heard the challenge and is leading a response. They argue for the introduction of a meaningful levy on big companies that fail to invest adequately in R&D. Depending on the size of the firm, this levy might be between 0.25 percent and 0.5 percent of a company’s revenue. Willox said these sorts of measures would make companies pay their fair share for creating an environment that promotes innovation in Australia.
“Everything must be on the table. There can be no sacred cows,” Willox added, signaling that all options should be considered to boost R&D funding.
Addressing Structural Issues
Even more troubling, experts contend that Australia’s R&D investment is the canary in the coal mine for deeper problems in the business ecosystem. Weak private investment and an outdated tax and regulatory framework are cited as major impediments to innovation.
Willox described the necessity for bottom-up reforms in the manner industry engages with research institutions, and continued,
“We must fundamentally re-imagine Australia’s R&D strategy as a dynamic, responsive system that recognises industry isn’t just a vehicle for commercialising R&D developed elsewhere.”
This view has resonated strongly with our stakeholders. They’re right to think that moving the goal posts on R&D spending targets won’t go far enough to address the underlying problems. A concerted strategy is required to improve the alignment and cooperation between industry and research organizations.
The Road Ahead
Yet Australia is facing growing calls to lift Australian Government R&D spending. Experts stress the importance for stable, predictable and long-term funding sources. Arabia noted that the underperformance in both government and business-led research initiatives has reached intolerable levels:
“Research and development underinvestment by both government and business had been long-term and is now intolerable.”
She argued that today’s disruptive and tech-driven world requires a strong commitment to R&D investment.
“It’s time to call time and rectify declining investment in business research and development. It’s time our economy and industry become more innovative,” she concluded.
Now more than ever, leaders from the public, private and philanthropic sectors are recognizing the need to reform. They are demanding bold moves to maintain Australia’s edge in the race for innovations and new economic prosperity around the world. As discussions progress, the focus will remain on creating an environment that encourages sustained R&D investment to foster future prosperity.
