We are all aware of the challenging fiscal environment facing Australia and the difficult decisions Treasurer Hockey will need to make in fashioning the upcoming Budget.
The debate about the Budget has so far focussed on fiscal restraint. However, balancing a budget goes to both income and expenditure. Indeed, income is a significant issue for Australia. Low technology manufacturing is exiting Australia to seek lower cost environments and the return on natural resources is declining as lower cost mines come on line in South America and Africa. Australia’s traditional export industries do not sit comfortably in a high cost base developed nation like Australia.
The most affluent developed nations have developed high-technology manufacturing sectors that leverage off the intellectual capabilities of their well-educated populations, producing high value-add exports. These are industries which can prosper within a high cost economy.
The critical step in developing a high value-add economy is a partnership between university research and industry. A successful nation needs both exceptional research producing new ideas and high technology industries capable of innovation. Australia has a excellent university research record, but our funding system funds research quantity rather than research quality. The Sustainable Research Excellence (SRE) was intended to drive more funding to research quality and to fund excellence, wherever it occurs. However, SRE has been cut and delayed, and represents only a small fraction of total expenditure on research.
Despite the strong evidence that concentration of research spending achieves the biggest returns for a nation, Australia seems unable to make the tough decision to concentrate our funding.
Australia also has precious few high technology industries capable of using exceptional research. The percentage of scientists, particularly PhD qualified scientists, employed by Australian industry is low by international standards, as is the investment in Research and Development by Australian industry.
Australian universities can do a much better job of interacting with industry, but there is a hard truth that Australian high-technology industry with which universities can interact is thin on the ground.
The real challenge for government is to create an environment that will develop a productive innovation ecosystem. This is a hard task but one that is critical if Australia is to transition from its resource-dependent past to a new future.
The alternative is a declining economy and certain erosion of our standard of living.
In the short term, Australia cannot afford a further erosion of our research base. This is an immediate challenge for the Treasurer. Any further weakening of the research sector will make economic transformation almost impossible.
The signs over the last 12 months have not been positive. Much has been said about cuts to university funding, cuts that would be better described as cuts to research, since this is where they have been focussed. Universities have had to meet much of the significant short-fall in funding for critical research infrastructure like the synchrotron, the SRE cut and delay and the efficiency dividend which has diminished research block grants. So while the efficiency dividend on teaching revenue is currently blocked by the Senate, its application to research has gone ahead.
We also face a research funding cliff with the termination of the National Collaborative Research Infrastructure Strategy and the Future Fellows program. Without additional funds in the coming Budget, these programs will end, and the consequences for our national research capacity will be profound. Our best and brightest researchers will leave Australia in search of employment in innovative economies. Their jobs will disappear with the end of the Future Fellows program and the research infrastructure necessary to carry out their work will close or be mothballed.
There are no easy choices here for the Treasurer. But research should be seen as an investment in innovative new industries, industries than can only prosper if Australia has an exceptional research base. The transformation of our economy through the development of a productive innovation system requires change to our culture, incentives and society. But the very first step is to not dismantle the basic research infrastructure we have taken decades to build, because it is the foundation upon which we can secure our economy for the long term.
Professor Ian Young AO
Vice-Chancellor, The Australian National University
Chair, The Group of Eight
This oped was published in the Australian Financial Review, 31 March 2014.