By Catriona Jackson, Universities Australia Chief Executive
Speaking at the National Press Club last month, federal Industry and Science Minister Ed Husic drew a clear line in the sand with regard to the government’s appetite for new spending.
The minister warned that increasing our investment in research and development – which is currently well below the OECD average – won’t happen by simply asking government for more funding.
On one hand, this is an understandable position – taken at a time that calls for less public spending. Factors beyond the government’s control are fuelling a parlous fiscal environment, making the task of paying down Covid-19 debt and returning the budget to a position of strength harder.
On the other hand, measures that drive productivity and grow the economy pay for themselves through the extra economic activity they generate, offsetting the initial hit to the budget.
R&D does this in spades, and governments routinely make investments in this vein.
Subsidising childcare, for example, increases workforce participation which spurs productivity. The same justification has driven spending on infrastructure to record levels.
Yet successive governments have failed to apply this basic economic rationale to R&D, despite the significant return on investment it delivers.
A dollar invested in research makes an economic return five times that, while modelling shows a 1 per cent lift in spending on R&D would grow the economy by $24bn over a decade. And that’s before adding the significant social gains it generates.
This begs the question: why is investment in this vital national endeavour going backwards?
Australia’s spending on research – currently at 1.8 per cent of GDP compared with 2.25 per cent in 2008 – is in free fall relative to the economy and lags the OECD average of 2.68 per cent.
This has been driven by a decline in expenditure on R&D as a share of GDP from government and business, leaving universities exposed while the cost of research, done on behalf of the nation, rises. In 2020, our institutions funded more than half the cost ($6.735bn) of their R&D activities, which account for 36 per cent of all research undertaken in Australia.
Our reliance on international student fees to pay for this work underscores the urgent need for action. Revenue from fees fluctuates wildly – a vulnerability exposed during the pandemic – and is driven by factors that can overwhelm other policy drivers.
The current model isn’t sustainable, particularly given the vital role of R&D in preparing Australia for the challenges in front of us. Geopolitical and industrial pressures are chief among them.
Navigating the whole of economy energy transition is just one such global task we cannot rise to without university research and expertise.
On the home front, building capability to operate nuclear submarines is another challenge universities will be heavily involved in. Research is also a powerful tool for diplomacy, helping to overcome national and political divides. It is essential that we continue to build partnerships with our neighbours and develop a stronger understanding of the world’s many cultures, histories and emerging challenges.
We cannot continue doing more with less. Universities are a vital partner of government in delivering these national priorities, but we need greater buy-in to turn problems into opportunities, which is what research does.
If we want to hold our place as a serious research nation – and we must – Australia needs to fund R&D properly and quickly – at least equal to the OECD average by 2030. If we don’t, we risk falling further behind our global peers in generating the ideas, capability and knowledge we desperately need.
A whole-of-government strategy for funding research across all portfolios, as opposed to taking solely from the education bucket, will get us some of the way there, but we also need the right settings to encourage business to invest in R&D.
Government has an opportunity through the current review of Australia’s higher education system to do these things, and more, for the benefit of universities and the nation.
Without significant changes to the way we fund research, we not only miss out on the economic benefit but our capacity to work across areas of national priority will diminish, and Australia loses.
Amid skill shortages, economic and industrial challenges, and geopolitical pressures, the need to maintain and grow our sovereign research capability has never been greater.
It’s unfathomable that our ability to continue performing this work for the good of the nation hinges on people choosing to study in Australia when the global battle for talent is only getting fiercer.
We need a research funding system that reflects the shape of our economy and supports Australia’s aspirations to remain a safe, successful and prosperous nation in a shifting global environment. The economic and social arguments for turbocharging Australia’s R&D efforts stack up. The cost of inaction, meanwhile, is too great to measure.
Catriona Jackson is the chief executive of Universities Australia.