Towards 3% R&D – what we learned over four weeks

By Peter Roberts

If @AuManufacturing’s editorial series – Towards 3% R&D – Turbocharging Australia’s Innovation Effort – has taught us anything, it is not the national myth of plucky Australians being an inventive people battling to commercialise their ideas.

Towards 3% has taught us that unlike leading nations, Australia doesn’t have a supportive innovation ecosystem as it is sometimes called.

In fact it doesn’t have an innovation system at all – just a cobbled together environment of competing governments, ministries, institutes, boards, commissions, councils, committees, statutory bodies, organisations and programmes that confuses innovation goals as much as help it along.

The big news from the recent Budget was the launching of a ‘strategic examination of Australian research and development’ as part of the Future Made in Australia package of measures.

But Towards 3% R&D has taught us that the many faults, failings and contradictory programmes are well known and – by all means have an inquiry to detail the issues – some action from the top instead of kicking the can down the road – again – would have been welcome.

We asked readers to send us their views on what is going right and wrong, and how to fix our innovation system and we received around 40 substantial contributions – of which we have been able to publish 27 – see the list of articles and links below.

We heard from politicians, academics, leaned academies such as ATSE, from large companies such as Dig Howitt, CEO of Cochlear and Boeing, and small including 1414 Degrees, Circuitwise Electronics and Grey Innovation.

From Dr John Howard of Howard Partners we learned that far from moving towards the government goal of 3% R&D, overall innovation effort has slumped from 2.2% of GDP – around the OECD average – a decade ago to only 1.68% of GDP.

Business spending on R&D

Business spending has collapsed from 1.37% of GDP in 2007 to 0.92% in 2019. R&D and innovation are investments in the future of a business and the economy, and we are underspending.

We learned that there is an inordinate reliance on spending by universities – laudable and necessary of course but probably the least connected to economic outcomes of any research.

Almost half of higher education R&D is in health, with only 6.5 percent allocated to manufacturing, and even less to information and communication services.

Pure research and medical research are both laudable, but Australia is a country where we have only one MedTech company of global scale, CSL waiting in the wings to commercialise discoveries – so much of our research necessarily is taken up overseas.

At the same time we have a Labour federal government which, perplexingly, does not make any distinction between foreign companies operating here and those that are Australian owned, based and led.

From Dr Tony Peacock, formerly CEO of the Co-operative Research Association, we learned that our efforts to foster collaboration between industry and research are falling short.

From Elliot Duff, the highly respected former CSIRO robotics researcher of 35 years, we learned that we have turned our back on efforts to diffuse innovations through the economy, especially to the SMEs that are the backbone of industry.

There is no national innovation plan

Above all we found there is no overall national innovation plan, and no method for meaningful co-ordination within the federal government, let along between Canberra and the states.

When the Albanese government came to power we expected some of these things would be fixed along with action to achieve Labour’s goal of 3% R&D as a share of GDP.

But spending has continued to slide including, according to Emeritus professor Roy Green of UTS Sydney who showed that under Labour, Australia has suffered the biggest ever fall in higher education spend recorded by the ABS, from 0.61 percent in 2020 to 0.55 percent in 2022.

And while Defence Industry Minister Pat Conroy took the trouble to detail some real reform of defence innovation and better linking it to procurement, the Minister for Industry and Science, Ed Husic failed to share his views with readers of @AuManufacturing, despite initial promises he would. Worse, Husic’s media adviser stopped responding to @AuManufacturing’s phone calls or emails more than two weeks ago.

Towards 3% R&D – Turbocharging Australia’s Innovation Effort

The government’s own target is for a spend of 3% on R&D.

This could be achieved by 2035 with extra R&D spending by business and government of $4.4 billion a year, which it has been calculated would grow the economy by $133 billion a year – each dollar spent on R&D adds $3.50 to GDP.

Really, an inquiry is not good enough Mr Albanese – our readers have spoken and identified that we need a leader to take the national innovation ecosystem in hand and lead real reform, not just with the fine words we have seen so far, but with action, now.

On the other side of the coin some progress is being made despite the siloed reality that is the innovation ecosystem.

Defence innovation is being better linked to eventual procurement, the National Reconstruction Fund and Green policies, opportunities in space are creating opportunities, and the R&D Tax Incentive has finally settled down and is working admittedly on a small scale.

And at the company level, from Professor Danny Samson we learned from his lifetime of study at the University of Melbourne how companies can best organise their own internal innovation efforts.

Thank you to everyone who contributed, submissions are listed below and will be summarised soon in a special e-book coming out soon.

This series is brought to you through the support of our principal sponsor, public accounting, tax, consulting and business advisory BDO, and R&D tax incentive consultancy Michael Johnson Associates.