The Australian Academy of Science is calling for an urgent national conversation on R&D investment in Australia.
Investment in R&D is at a historic low. Within five years, Australia will be at the bottom of the OCED, a perilous place in a technologically advanced and volatile world where research - and the technologies it produces - is a source of intense global competition and power. Without it, no nation can remain prosperous or safe.
Australia has a sustained and intolerable pattern of R&D underinvestment by government and the business sector.
Sustained business sector underinvestment has now amounted to a gap of $32.5 billion when compared with the OCED average (0.89% of GDP, less than half the OECD average of 1.99%).
In 2023, the Productivity Commission stated that Australian businesses are not keeping pace with the frontier of innovation and may not be aware of how far they lag.
Large businesses have built their success on the fruits of long-term taxpayer funded research and R&D incentives. They are well positioned to invest and innovate, and to reap the benefits of improved competitiveness, greater profits and access to new markets.
Urgent measures are required to stimulate business investment in R&D.
The Academy proposes incentivising business investment in R&D by applying either a 0.25% or 0.5% R&D levy to businesses with annual revenue of $100 million or more, which can be discounted if businesses invest in R&D.
The levy revenue must be legislated, quarantined and invested in research to maintain the wellspring of innovation needed to keep the R&D system - including businesses - healthy, productive and delivering for all Australians.
The Academy presents two options: an annual continuous levy or a time-limited levy applied until a Research Future Fund reaches maturity.
The measure rewards those businesses that invest in R&D, incentivises those that don't, and grows the pool of funds available for investment in research.
The Academy commissioned independent economic modelling based on publicly available data from the Australian Taxation Office.
It estimates an R&D levy could raise between $2.14 billion and $12.84 billion annually which would contribute to a Research Future Fund and its returns invested in research.
Australia's persistent underinvestment in R&D threatens our productivity, limits wage growth, threatens our standard of living and weakens our ability to respond to global volatility. These threats have consequences for every member of society.
For many nations, science and technology is considered an indispensable strategic national asset. Not in Australia, where our record of R&D investment by government and business shows a sustained pattern of decline.
We want technologies like AI to boost our productivity, we want new medicines to keep us healthy, and the most advanced Defence capabilities to keep our island nation safe, but we aren't willing to invest sufficiently in the discoveries that create them.
Sovereign R&D capability gives us the tools we need to be self-reliant, making us more resilient to external shocks, and turbo charging productivity and economic growth. It's an investment in ourselves rather than a reliance on others who are motivated to advance themselves, not us.
The Academy welcomes additional proposals to stimulate R&D investment and to create the conditions for the broad R&D ecosystem to thrive.
The Academy's proposal is included in its submissions to the Economic Reform Roundtable, the Productivity Commission's Inquiry, and to the Strategic Examination of Australia's R&D system, which is currently exploring how to drive greater industry investment and boost overall R&D intensity and industrial diversity in Australia.
