The Strategic Examination of Research and Development (SERD) issues papers have failed to address declining investment in fundamental research (sometimes referred to as basic or discovery research), instead implying research is only important if it can be commercialised by industry.
President of the Academy Professor Chennupati Jagadish AC said the decline in fundamental research investment over the last decade cannot be ignored.
"Fundamental research is the wellspring of innovation. There is no 'D' without 'R'," Professor Jagadish said.
"When nurtured, fundamental research enables innovation, boosts productivity, grows the economy, and allows us to thrive and stay safe in a rapidly changing world."
The SERD has rightly acknowledged the striking underinvestment in R&D by the business sector, now more than $28 billion less than the OECD average.
However, Government investment in R&D, including in fundamental research, is also declining and must be urgently addressed, particularly as the cost of doing research is rising and funding models are at breaking point.
"Public and private R&D investment serve different but complementary roles and both need attention to create a coherent and thriving ecosystem that supports Australia's needs," Professor Jagadish said.
Government provides higher-risk patient capital to support fundamental research that generates new knowledge, is unpredictable, can be difficult to commercialise or - in the case of public good research - should not be commercialised.
While private investment is directed to scale and commercialise viable lower-risk applied research, government funding is vital for research that benefits everyone in society, not just a single company.
It is often noted that the quality and volume of Australia's fundamental research effort is disproportionate to our population size.
This does not mean Australia's fundamental research effort is adequately funded, nor can it sustain long-term funding cuts.
The facts are that ARC and NHMRC funding has declined in real terms for more than a decade and a smaller proportion of it is directed to fundamental research.
Government investment in CSIRO has also declined in real terms.
Draining the wellspring of innovation has consequences for Australia's ability to grow industries that diversify our economy.
The Academy strongly recommends a 10-year R&D investment plan enabling the public and private sectors to work together to reverse the funding decline and to create a globally competitive R&D ecosystem in Australia.
"Given the constrained fiscal environment, the Academy has proposed a temporary R&D levy that is budget-positive; incentivises R&D investment especially by low-intensity R&D companies; and creates a new revenue stream that can support fundamental research," Professor Jagadish said.
R&D levies in the agricultural and grains sector have applied since 1989, are well tolerated, and have enabled significant innovations in these sectors.
The Academy's independent analysis shows the economic impact of an R&D levy on low-intensity R&D businesses is tolerable and is unlikely to have unintended consequences.
The Academy's response to the SERD issues paper also includes the following.
- Support for investment in next-generation high-performance computing and data (HPCD) to enhance Australia's digital innovation and AI capabilities. The Academy has advocated for this national capability over several years and we strongly welcome its inclusion in the SERD issues papers. The HPCD proposal must be underpinned by a long-term national strategy and roadmap to build and coordinate Australia's advanced computing capability.
- Support for the unambiguous recognition that fragmentation in Australia's R&D system is a barrier to progress.
- Strengthening of the proposed governance model by establishing an R&D Strategy Cabinet subcommittee and Ministerial Council under the National Cabinet. This would be a dedicated forum for cooperation between federal, state and territory governments.
"This is a once-in-a-generation opportunity to build an R&D system that can deliver economic and social benefits for all Australians," Professor Jagadish said.
"We must get this right."
