John H Howard, 10 December 2024
Australia’s ability to harness the full potential of its research and development (R&D) capacity has been a subject of intense scrutiny for at least 25 years.
Major policy reviews, including the National Innovation Summit (2000), the Cutler Review (Venturous Australia, 2008), the Ferris/ISA Review (Australian 2030, 2018), and the 2015 Senate Innovation System Inquiry (Australia’s Innovation System, 2015), have all identified recurring themes and areas of concern.
At the heart of these concerns is a consistent critique of Australia’s science, research and innovation system—one that, despite substantial investments in science and research, has failed to achieve the necessary breakthroughs or scale to maintain a globally competitive position.
These reviews, along with key policy statements such as Backing Australia’s Ability (2001), Venturous Australia (2009), and the National Innovation and Science Agenda (2015), have collectively pointed out that Australia’s innovation ecosystem suffers from persistent underperformance in key areas, particularly in business R&D investment, commercialisation of research, coordination across sectors, and skills shortages.
However, while the reports of these reviews have offered multiple recommendations, and the policy statements have committed to multiple actions, the challenge remains to implement effective strategies that address these systemic issues.
Central to the failure to reach these objectives has been the long-term decline in R&D investment as a proportion of GDP, particularly in the business sector, compounded by the absence of an effective centralised, strategic body to drive science, research and innovation policy in a unified manner.
The Decline in Business R&D Investment
One of the most pressing concerns identified in nearly every review over the past 25 years is the decline in business expenditure on R&D (BERD). Historically, the business sector played a crucial role in driving applied research, but over the last few decades, Australia has seen a shift towards higher education R&D, while private sector R&D has stagnated.
This issue was first highlighted in the National Innovation Summit, which noted that while Australia’s public research sector remained strong, its commercial outcomes were limited by business reluctance to invest in long-term, high-risk research initiatives.
The Cutler Review pointed out that business R&D in Australia was significantly lower than in peer countries, especially compared to the OECD average.
This lack of private sector engagement has been partially attributed to many factors, including the privatisation of government business enterprises (GBEs) in the 1990s. These enterprises, which had historically contributed a substantial portion of Australia’s applied R&D, were sold off to the private sector, leading to a dramatic shift in focus towards short-term profits rather than long-term innovation.
The privatised entities, most notably Telstra, were generally more focused on cost-cutting and efficiency than on fostering technological advancements that drive sustained economic growth. Only the corporatised CSL has maintained its commitment to R&D.
The Ferris/ISA Review echoed these concerns, pointing to the need for a greater business commitment to innovation to bridge the gap between world-class research and tangible commercial outcomes.
The Senate Inquiry also identified this issue as a key barrier to Australia’s future competitiveness, suggesting that the current R&D tax incentive system had failed to address the root causes of under-investment. The system was seen as complex, inefficient, and more beneficial to larger companies, leaving small-to-medium enterprises (SMEs) disadvantaged.
The decline in business investment represents a profound challenge to Australia’s innovation capacity. Unlike countries like the United States, Germany, and Sweden, which have seen private-sector investments in R&D grow steadily, Australia has failed to stimulate sustained, private-sector-led innovation.
This lack of business commitment to R&D makes converting research output into new industries harder, leading to missed opportunities in emerging fields like biotechnology, advanced manufacturing, and clean energy technologies.
The Commercialisation Gap: Research to Market
Closely related to the issue of declining business R&D investment is the recurring theme of commercialisation failure in Australia.
Despite being home to world-leading researchers, particularly in areas like medical research, mining technologies, and agriculture, Australia has struggled to translate its research excellence into marketable products and services.
This challenge has been a central theme in multiple reviews, most notably in the Cutler Review, which emphasised the disconnection between Australia’s research base and industry. The review argued that while Australia produced high-quality research, it lacked the mechanisms to commercialise this research and bring it to market effectively.
The Cutler Review suggested that Australia should foster a strong commercialization culture, encouraging researchers to collaborate with industry partners instead of staying isolated within academia.
The Ferris/ISA Review echoed these concerns, noting that Australia’s ability to take its research from the lab to the marketplace was underdeveloped and recommended establishing dedicated incubators, accelerators, and funding mechanisms to facilitate the commercialisation process.
Research output and economic impact continue to lag due to the absence of a centralised commercialisation body or clear pathways for innovation.
Although initiatives such as the Cooperative Research Centres (CRC) program and AusIndustry’s innovation programs have sought to address this challenge, their impact has been limited, particularly in fostering large-scale commercialisation in the private sector.
The government’s focus on early-stage commercialisation, such as the Innovation Connections program, has often failed to provide the necessary infrastructure to scale innovations into globally competitive companies.
This commercialisation gap is one of the most urgent challenges Australia faces. To succeed in a highly competitive global innovation landscape, the country must develop an environment where research institutions, industry, and government work together to turn ideas into products, services, and industries that can thrive locally and internationally.
Fragmented Innovation System: The Need for a Unified Strategy
Another consistent concern raised in these reviews is the fragmentation of Australia’s innovation system. This fragmentation manifests in lacking a centralised body that can coordinate efforts across the various arms of government, industry, and academia. Australia’s innovation policies have often been described as disjointed, with various agencies, ministries, and programs pursuing separate goals without a coherent overall vision.
The Cutler Review (2008) recommended the establishment of an Innovation Research Centre, a centralised body tasked with coordinating Australia’s innovation efforts and providing strategic foresight. This body would ensure that Australia’s research outputs are aligned with national innovation priorities and that policies are integrated to promote business investment, skills development, and commercialisation.
The Senate Inquiry (2015) raised similar concerns, calling for a consistent, coherent national strategy that would unite the efforts of various stakeholders in the innovation ecosystem. The lack of such a strategy has often resulted in duplicated efforts, missed opportunities, and inefficient use of resources.
Moreover, the absence of policy coordination between state and federal governments has hindered the development of regional innovation ecosystems, making it harder for Australian businesses and researchers to scale and collaborate effectively.
Without a unified strategy, Australia’s R&D system remains fragmented, with various sectors—education, government, and business—working in silos, often in competition rather than collaboration. A centralised innovation body could break down these silos, providing a strategic framework for aligning Australia’s innovation agenda with global trends and national priorities.
Skills Shortages: The Talent Gap
A critical theme throughout these reviews is the shortage of skilled workers in key innovation areas, particularly in STEM fields. The Cutler Review and the Ferris/ISA Review emphasised the need for a skilled workforce capable of driving innovation in high-tech sectors.
Despite Australia’s success in producing world-class research, the country has struggled to produce a workforce with the necessary skills to convert that research into commercial success. Its talent pool remains insufficiently developed, particularly in emerging fields like quantum computing, AI, and advanced manufacturing, where demand for skilled workers is high.
The Senate Inquiry called for reforms to STEM education and training programs to ensure Australia’s workforce is prepared to meet the demands of an increasingly innovation-driven economy. The National Innovation and Science Agenda also strongly emphasised improving STEM skills, proposing measures such as funding for STEM scholarships, incentives for teachers, and career pathways for STEM graduates.
None of the Reviews looked more broadly at the scope for institutional innovations, drawing on the features of international research systems.
To address this challenge, governments, industries, higher education, and the broader education system must invest in skills development at every level, from primary and secondary schools to universities and beyond. Ensuring Australia has a highly skilled workforce will be crucial to capitalising on emerging technologies and maintaining its competitive edge in global markets.
Moving Beyond the Noise
Australia's science, research, and innovation system faces long-standing and interconnected challenges well documented in foundational reviews, inquiries, and policy statements over the last quarter-century.
Declining business R&D investment, commercialisation gaps, fragmentation across policy domains, and skills shortages have consistently emerged as the central themes in these reviews, and they continue to undermine Australia’s ability to fully realise its innovation potential,
Various policy discussions and strategies have repeated the findings and recommendations from 25 years of reviews, but they lack the strategic integration and long-term commitment necessary to drive meaningful change. Many state governments, consultants, analysts, and commentators have adopted the findings and recommendations of these reports, often reproducing them as “new insights” without proper attribution or citation.
This repetition without reference not only diminishes the impact of past reviews but also impedes the development of new, forward-thinking solutions. Australia’s SRI policy discussions are increasingly dominated by a dilution of ideas, where bold proposals are often diluted into vague recommendations for “quick fixes” that become disconnected from their original context.
This has resulted in policy fatigue, with critical issues like underfunded research infrastructure, limited commercialisation capacity, and industry-university collaboration persisting despite the wealth of evidence provided in earlier reports.
To overcome this cycle, policymakers, industry leaders, and researchers must go beyond simply repeating past findings and begin the difficult work of integrating and implementing the solutions presented in these reviews. The problems are clear, but the road to resolution has been marked by fragmented policy responses, inconsistent implementation, and a failure to take bold, coordinated action.
The Strategic Examination of R&D represents a pivotal opportunity for Australia to finally address these systemic issues, building a more sustainable, collaborative, and globally competitive SRI system.
Conclusion
The Strategic Examination of R&D must be seen as a call to action that is not just about examining the same issues again but about committing to a coordinated, cohesive, and strategic approach to R&D investment, commercialisation, and national policy alignment.
For Australia to finally realise its innovation potential, it must move beyond the noise of repetitive policy recommendations and take bold steps towards implementation. This includes creating a unified innovation policy framework where the roles of state and federal governments are clearly defined, and a central innovation body can take the lead in fostering meaningful collaborations and driving a long-term, sustainable vision for Australia’s future.
It requires addressing the private sector’s disengagement from R&D and creating pathways that encourage early-stage innovation to scale into globally competitive industries. Crucially, it involves investing in STEM-HASS education, including transforming and creating new institutions that are fit for purpose so Australia can develop the talent pool needed to drive the industries of tomorrow.
Australia’s future as an innovation leader hinges on its ability to consolidate the wealth of knowledge and insight already provided by previous reviews and to act decisively in the face of mounting global competition. The challenge is not a lack of knowledge—it is the failure to act on the wisdom these reports have offered over the years.
The Strategic Examination of R&D must now catalyse a new phase of action—one where the focus is on implementation, collaboration, and creating a coherent, integrated, and forward-thinking policy framework that will position Australia as a global innovation leader for generations to come.
A full version of this Paper, including the recommendations of each review, the Government response, and the actions set out in the policy papers, can be downloaded at:
The paper does not address the sustained (ongoing) commitment, outcomes, and impacts of the policy actions covered in the policy papers.
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