John H Howard, 4 December 2024
The Australian Government’s Strategic Examination of the Research and Development (R&D) system offers a promising yet challenging pathway for reform. While its broad mandate and alignment with national priorities are strengths, significant structural and systemic barriers may impede its success.
Strengths in the Approach
Independent Panel with Credibility: The appointment of an independent expert panel, including individuals with substantial expertise in business, industry, academia, and policy, positions the review to provide high-quality recommendations.
The Chair, Robyn Denholm, is an experienced and strategic CFO, COO, and board member with broad leadership and financial and operational expertise. Her roles include current Chair of Tesla Inc.'s Board, Operating Partner at Blackbird Ventures, and prior board experience in high-tech firms, including roles at ABB Ltd. and Echelon Corporation, and skilled in mergers and acquisitions, capital markets, restructuring, and organisational re-engineering.
The inclusion of Emeritus Professor Ian Chubb, with his extensive experience in science policy, brings institutional memory and gravitas, while Dr Kate Connick, CEO of LaunchVic, the Victorian Government's $60m initiative to accelerate startups, brings knowledge and experience in driving new ideas and creating jobs. Professor Fiona Wood is one of Australia’s most innovative and respected surgeons and researchers.
The Panel’s independent status also enhances its ability to deliver frank, evidence-based assessments unencumbered by short-term political pressures. However, translating such advice into actionable policy has historically been fraught with challenges.
Wide Consultation Framework: The review promises to consult across a diverse spectrum of stakeholders: universities, businesses, government entities, and community groups, including First Nations peoples. This inclusive approach acknowledges that Australia’s R&D ecosystem involves multiple actors with varying objectives.
Broad consultation could lead to more representative solutions, particularly in areas where past reforms have struggled, such as engaging small-to-medium enterprises (SMEs) in R&D or ensuring equitable regional development.
However, consultation alone cannot resolve competing interests. For example, universities might prioritise basic research and international standing, while industry demands solutions tied directly to profitability and applied outcomes.
Bridging these gaps requires not just input but active consideration of how to reconcile fundamental institutional divergence in purpose, incentives, and performance assessment.
Alignment with National and Global Priorities: The government ensured that the R&D review would be useful for Australia's larger strategic goals by connecting it to important national issues like net zero emissions, manufacturing sovereignty, and key technologies.
This alignment could also attract international collaboration and investment. For instance, fostering partnerships in renewable energy or quantum computing would situate Australia as a global leader in areas of emerging technological importance.
However, the success of this alignment depends on whether funding mechanisms and institutional structures are agile enough to respond to these priorities. For example, funding cycles and program timelines often lag behind the pace of technological change, rendering R&D initiatives reactive rather than forward-looking.
Challenges
Constitutional and Federal Dynamics: Australia’s federal structure creates significant barriers to reforming the R&D system. The division of responsibilities between the Commonwealth and States often leads to fragmented policies and misaligned priorities.
For instance, Commonwealth jurisdiction largely governs education and research funding, whereas States drive many industry-related initiatives such as innovation hubs and precincts. Without a clear mandate to address these overlaps, the review risks producing recommendations that lack implementation pathways.
Past reviews, such as the 2008 Cutler Review, the Performance Review of the Australian Innovation, Science System (2016), the Australia 2030 Innovation Strategic Plan (2018), and initiatives such as the National Innovation and Science Agenda (NISA, 2015), acknowledged the need for greater intergovernmental coordination, but little progress has been made.
Achieving a cohesive strategy would likely require a Council of Australian Governments (COAG)-style agreement, which the current Terms of Reference do not explicitly support.
Historical Implementation Gaps: Reviews of the Australian R&D system have consistently highlighted the same issues: underinvestment in R&D, weak industry-university linkages, and insufficient private-sector participation. For instance:
Australia’s gross expenditure on R&D (GERD) as a percentage of GDP has stagnated at around 1.7%, well below the OECD average.
University-led research continues to dominate the landscape, with limited translation into commercial applications.
These recurring problems suggest systemic inertia rather than a lack of insight is the primary barrier. Without a robust implementation framework, this review risks adding to the repository of well-intentioned but largely ineffectual recommendations.
Scope Ambiguity: The broad scope of the review, covering everything from industry investment to regional equity, risks spreading resources too thinly. For instance:
The review seeks to address the “equitable distribution of R&D benefits,” a complex and politically sensitive objective. Regional areas often lack the infrastructure, skilled workforce, and institutional capacity to participate fully in the R&D ecosystem. Addressing these disparities will require targeted investments, which may conflict with other priorities such as national competitiveness.
At the same time, the review wants to increase Australia's R&D intensity by getting more businesses to participate. However, there isn't a clear plan for how to get around problems that have been around for a long time, like the reluctance of global companies to invest in R&D in Australia, the scarcity of early-stage venture and expansion capital (generally unavailable in regions), the low-risk appetite of Australian businesses, and the impact of the prudential regulation of the banking system on financing medium-sized business growth.
Ensuring Success
Coordination through Multi-Level Governance: One avenue to overcome constitutional constraints is establishing formalised governance structures that facilitate collaboration across jurisdictions.
A national R&D council or Research Foundation, with serious Commonwealth and State representation and resourcing, could streamline funding allocations and ensure alignment with national priorities. Such a body could also oversee shared infrastructure projects, such as advanced manufacturing facilities, that benefit multiple states.
Focused Implementation Planning: To avoid the pitfalls of past reviews, the panel must develop detailed, actionable recommendations with clear accountability mechanisms. For example:
Establishing target R&D intensity benchmarks for both public and private sectors.
Creating a timeline for implementing recommendations with progress monitored by an independent oversight body.
The action plan should also prioritise a few high-impact areas, such as scaling up renewable energy research or supporting AI development, rather than attempting to address every identified issue.
Leveraging Global Best Practices: Learning from countries like Germany or Israel, which have successfully integrated industry and academia, could provide actionable models for Australia. For instance, Germany’s Fraunhofer Institutes focus on applied research directly linked to industry needs, while Israel’s innovation ecosystem thrives on strong government-industry collaboration and robust venture capital networks.
Adopting tailored versions of these models—such as industry-focused R&D precincts co-funded by governments and private stakeholders—could catalyse similar success in Australia.
Enhanced Business Engagement: Encouraging greater industry participation will require addressing financial and cultural barriers. Better targeting of tax breaks like the R&D tax incentive might help, but they should be paired with ways to get people to work together, such as funding streams directly linked to partnerships between universities and businesses.
Conclusion
The Strategic Examination of the R&D system has a unique opportunity to reshape Australia’s innovation landscape. However, its success hinges on its ability to:
· Address deep-seated structural issues, particularly intergovernmental coordination.
· Prioritise implementation planning over general recommendations.
· Secure strong political and institutional commitment to reform.
Without these, the review risks perpetuating the cycle of well-documented problems and insufficient action.
To break this cycle, the examination must not only diagnose the challenges but also prescribe bold, achievable solutions with mechanisms for accountability and follow-through.
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