When then science minister Ed Husic teamed up with education minister Jason Clare last December to announce the panellists and terms of reference for a “”, observers were entitled to a touch of scepticism.
In 2015, innovation guru Roy Green – then dean of business at the University of Technology Sydney (UTS) – did some??for a Senate committee inquiry. He found that since the turn of the century, there had been at least 60 reviews, government-commissioned reports, ministerial policy statements and information papers addressing Australia’s innovation system.
“People are pretty reviewed out,” Green told?探花视频. “I think it’s last chance saloon time for the research and innovation system. We need to get it right this time.”
The new?review, dubbed the??(Serd), will not gather dust like its predecessors, according to Husic’s successor.
“It’s a deliberate and purposeful review,” new science, industry and innovation minister Tim Ayres told the?Australian Financial Review’s Higher Education Summit in August. “It’s not just another…examination designed to reach a familiar set of conclusions.”
The review is now approaching its endgame: “We’re definitely into testing…The time for admiring the problem has now passed,” said Serd secretariat head Dom English. But while the review is deliberately not being officially called a review so as, Green said, to distinguish it from its numerous predecessors, the commercially focused conclusions it appears to be moving towards do seem rather familiar.
For universities, the overriding concern is ensuring stable funding for their research. For the panel – led by Tesla’s Sydney-born chair, Robyn Denholm – the overriding concern is ensuring that research and innovation is used productively. And the contrast in views is becoming increasingly apparent, as the panel releases a series of “” to guide its final round of consultations, before presenting its “action plan of recommendations to government” some time before the end of the year.
Until recently, universities’ main complaint was that support for indirect research expenses – such as technicians’ salaries and the costs of maintaining and provisioning labs – had failed to keep pace with overall research funding. That perception is confirmed by the Serd panel, which says that while direct research grants increased by 157 per cent, in real terms, between 2001 and 2023, funding for indirect research costs grew by just 45 per cent, forcing universities to meet ever more of their ballooning overheads bills from their own resources.
More recently, that concern has developed into particular worries about federal policies that have?destabilised international education?– the main contributor to universities’ general funds, which now pay for 51 per cent of their research efforts, according to the panel.
The policy changes – including?soaring student visa application fees,?soft caps?on foreign enrolments and?slow and unpredictable visa processing?– are yet to constrain universities’ income from overseas students, which rose by 22 per cent to a record A$13 billion (?6.35 billion) last year. But earnings of this scale are likely to be short-lived, with the number of visa applications lodged offshore for higher education study declining by 23 per cent in the last financial year. The decline could accelerate if more students baulk at what are now the world’s most expensive student visa fees, or if the government applies its soft caps more assiduously.
Moreover, the immigration crackdowns, along with the lingering effects of the pandemic, already appear to be widening the?wealth gap?among Australia’s 38 publicly funded universities. The 16 richest institutions – those with more than A$1 billion in annual revenue – captured 78 per cent of the sector’s international education earnings last year, up from 77 per cent in 2023 and 76 per cent before the pandemic.
Meanwhile, most of the?Australian Universities Accord?recommendations to address research funding problems are yet to elicit any government response. They include funnelling more money into Australian Research Council grants, establishing a “Solving Australian Challenges Strategic Fund”, boosting government use of university research, funding more PhD scholarships and raising minimum doctoral stipends.
The accord also recommended that support for indirect research costs should be gradually increased to 50 cents for every dollar of direct research funding. But while a few extra cents of indirect research funding might mean the world to universities, such considerations may not loom large in the minds of a review panel whose chair moves in a different universe; in her day job, Denholm recently conjured a??to retain the services of Tesla CEO Elon Musk.
A “” to the Serd panel’s latest report, which summarised feedback from its February discussion paper, acknowledged the need for Australia’s research strengths to be sustained. “We must however turn more purposefully toward creating value from this investment – particularly through support for new high-growth firms and industries enabled by Australia’s research and development capabilities,” it read.
It is an instrumental view of research, embraced around the Western political world as ministers and officials pin their hopes on high-tech advances to extricate them from a productivity trough. In the UK, for instance, education secretary and deputy leadership candidate Bridget Phillipson has insisted that any future boosts to universities’ funding?will hinge?on their contributions to economic growth. And in New Zealand, universities minister Shane Reti has said that “maximising economic impact and innovation” will be one of the “clear priorities” driving the country’s new?tertiary education strategy.
“We need stronger and faster pathways from research into real world impact, and we need institutions that can adapt quickly to new opportunities in areas like advanced technologies,” Reti told a?recent in Christchurch.
Indeed, New Zealand’s government has gone so far as to cut or redirect existing streams of research funding, insisting that universities need to extract more commercial returns from their research – an approach branded “magical thinking” by science lobbyists.
The Serd panel is singing from the same song sheet, insisting on the need for “greater value” from what it increasingly refers to as RD&I – research, development and innovation – with research and development seen as too narrow a concept unless companies use new knowledge and products to innovate.
Policy consultant John Howard said the panel appeared to be more focused on the balance than the quantum of research funding, with one priority being to address the “very, very low” proportion of spending currently reserved for the D of R&D. “It’s…spending the time in scale-up, prototyping, testing and so on which turns the research, if you like, into an innovation. We need to get the balance right. Otherwise, it just stays as research and doesn’t become innovation.”
The reviewers seem frustrated with an academic research machine largely dedicated to producing journal articles. “Our fundamental challenge is to translate knowledge into impact, especially into successful RD&I businesses,” the panel noted in the second of its six issues papers. Such businesses “create high value jobs, increase productivity and contribute to economic growth leading to better societal outcomes”. They also “reinvest in RD&I activities to accelerate and expand the RD&I sector”.
It is a vision of a virtuous cycle that differs markedly from the one that funds most current university research: top-ranked institutions recruit planeloads of foreign students, whose fees bankroll reams of journal articles, which helps preserve the universities’ reputations and rankings, which attracts more foreign students.
Simply put, the university funding model incentivises the generation of knowledge. The panel thinks that knowledge should be put to a more economically productive use.
To be fair to university leaders, they have been prosecuting much the same argument for years. Vice-chancellors have bemoaned the lack of engagement between businesses and the university sector and the difficulties that academics’ inventions encounter in bridging the “valley of death” – that is, the dearth of available funding at proof-of-concept stage.
University of Melbourne vice-chancellor Emma Johnston has proposed a “fund of funds” to help solve this problem. Sourced perhaps from existing pots of government money, such as the A$15 billion (?7.3 billion)?National Reconstruction Fund, it would “sit over the top of universities’ individual venture capital funds” to inject scale and clout.
“In Australia, we’re very good at getting our startups going,” Johnston told the?Australian Financial Review’s Higher Education Summit in August. “We keep them going for a little while, but then they’re either dying through lack of capital or they’re being swallowed up by big multinational companies. We know from the UK, from the US, from Japan, from around the world, that when you embed high-quality, patient venture capital at the very heart of…university innovation ecosystems, it really works.”
Ideas like this abound in the Serd issues papers, each of them about 15 pages long, which show where the panel’s thinking lies. One looks at “tackling Australia’s conservative capital culture” by encouraging angel investments and addressing skills gaps in the venture capital sector, for instance. Another examines how to encourage “breakthrough innovation”. And a third outlines how government interventions – to accelerate the creation of start-ups and cultivate skills in the “scaling of new businesses”, for example – can help the RD&I system “achieve greater economic impact”.
Yet another advocates reorganising Australia’s “fragmented” RD&I system – with 215 separate funding streams from the federal government alone – around up to five long-term “focus areas” aligned with the nation’s research strengths, societal needs and “market opportunities”.
The sixth paper, on “government as an exemplar”, had not been published when?THE?went to press. But the fifth paper, on “foundational research”, was arguably of greatest interest to university leaders hoping for a research funding fillip.
If so, they were likely disappointed. Proposals include long-term ongoing funding for nationally significant research infrastructure, a ministerial research fund able to provide “short, focused support” in priority areas, and a new method for indexing Australian Research Council funding.
The paper also says funding for indirect costs should keep up with increases to competitive grant funding, and universities should work harder to commercialise their inventions. None of these suggestions appears likely to fill the hole created by a downturn in international education.
The paper’s main proposal is a reorganisation, rather than an expansion, of the funding pie. The panel says universities should be pressured to?specialise their research efforts, particularly in the proposed “focus areas”, through policy and funding levers such as the “mission-based compacts” negotiated between universities and the Australian Tertiary Education Commission.
Monash University higher education expert Andrew Norton said such an idea was “very consistent” with the government’s overall approach. But “whose mission are we talking about here?” he asked. “We’re moving away from the historical model of university autonomy towards a model where universities are much more agents of policy for the government of the day. I don’t think there’s any kind of organised ideological attack on university autonomy – it’s just that it’s ignored in practice – or treated as a very secondary consideration.”
If the Serd does result in any increased funding, universities are unlikely to see much of it, if any. Instead, it is likely to go to businesses through the “new approach” to the R&D Tax Incentive (), via which the panel aims to encourage the aforementioned “breakthrough innovation”.
RDTI currently provides tax offsets worth about A$4.6 billion a year to companies that undertake more than A$20,000 worth of R&D per year. It offers tax deductions up to 16.5 per cent above the corporate tax rate for R&D spending, up to a “ceiling” of A$150 million a year.
The scheme is particularly generous to small and medium-sized enterprises (SMEs) with annual revenue of up to A$20 million. Their offset rate is 18.5 per cent above the company tax rate, and if an SME does more than enough R&D to reduce its taxable income to zero, its tax refund can exceed its tax bill.
“Indirect” incentives like the RDTI are considered a crucial part of the mix of innovation policies. While “direct” incentives, such as upfront grants, allow governments to be very prescriptive about the types of R&D they support, indirect incentives encourage companies to push ahead without spending time negotiating the terms, advocates say. The RDTI has been found to be particularly effective at fostering R&D among SMEs.
But critics have many gripes about the scheme. One is that the A$20 million revenue limit for SME classification has not changed in nearly 15 years. Another is that the A$150 million R&D spending ceiling for reductions potentially encourages large companies to do their R&D offshore if more generous terms exist elsewhere.
A third complaint is that the scheme is far too complex, with many companies relying on consultants to help them navigate it. ?A fourth is that it incentivises dubious types of R&D; gambling and tobacco firms were eligible for the tax breaks until a July rule change. And a fifth is that the government never adopted a suggestion in a??that collaborative R&D – businesses working with universities, for example – should attract a “premium” offset rate.
But the biggest grievance is a widespread view – shared in many countries that have adopted R&D tax credits – that the scheme largely rewards companies for R&D they would have done anyway and so is little more than a corporate tax cut under another name.
The Serd panel has floated numerous ideas to address these shortcomings. The scheme could be refocused on “novel and transformational R&D”. The SME revenue limit could be increased. The A$150 million ceiling could be raised or removed entirely. A new RDTI stream could be created for startups. Eligibility criteria and assessment processes could be simplified. And, of most interest to universities, premium offset rates could be introduced for collaborative research, particularly in the Serd’s four or five “focus” areas.
But is RDTI really the best approach to stimulating industrial research? UTS’ Green is not convinced.
“The problem with the RDTI is that it just grows like Topsy,” he said, adding that it accounts for around a third of total commonwealth funding for R&D, across all sectors: “It’s squeezing out other forms of support. A lot of it is going to business as usual.”
Green would like to see a robust comparison carried out of the cost-effectiveness of tax credits compared with directed funding programmes with set priorities. “That would be an interesting study, if anyone was brave enough to do it,” he said.
No doubt any number of university economics departments would be brave enough to do it. Whether they would be willing to do it could be another question, as the Serd shepherds universities away from the inadequately funded pursuit of knowledge with no obvious spin-out potential.
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