Towards 3% R&D – Higher education in its biggest-ever decline by Professor Roy Green

As we have been publishing our editorial series – Towards 3% R&D – Turbocharging Australia’s Innovation Effort – new statistics have emerged that show that even higher education research, until now a national strongpoint, is faltering. Professor Roy Green details the biggest decline ever recorded in higher education research.

The newly released Australian Bureau of Statistics (ABS) data on Higher Education Expenditure on R&D reinforces concerns about the scope and direction of Australia’s R&D effort.

While the total higher education spend increased in monetary terms between 2020 and 2022, it fell as a share of GDP from 0.61 percent to 0.55 percent.

This represents the biggest decline in the higher education component of R&D expenditure since the ABS started collecting this data.

Up to now, with R&D spending by business and government stalled, higher education was doing much of the heavy lifting, thanks largely to growing international student revenues.

One reason for the decline of higher education spending on R&D as a share of GDP may be the drop in these revenues during the Covid pandemic, which is a clear demonstration of the precarious nature of this source of funding.

As a result gross expenditure on R&D in Australia has fallen from 2.2% of GDP a decade ago to 1.68 percent now – well below the OECD average of 2.8 percent, not to mention leading countries like Korea, Israel and Switzerland with expenditures of up to five percent.

This presents a formidable challenge to the Australian government which has announced a target of 3 percent R&D in GDP as part of its commitment to a more dynamic, knowledge-driven economy.

It has been estimated that the target could be achieved by 2035 with an additional R&D spend by business and government of around $4.4 billion a year.

This would also have the beneficial effect of growing the economy by $133 billion a year, if as has been calculated each dollar spent on R&D adds $3.50 to GDP.

@AuManufacturing is publishing contributions from readers for our series – Towards 3% R&D – turbocharging our national innovation effort – over a, month and will shortly publish contributions in an e-Book. Information: Peter Roberts, 0419 140679 or write to [email protected].

However, a further issue is how the R&D spend is distributed across socio-economic objectives.

The data shows that almost half of higher education R&D was in health, with only 6.5 percent allocated to manufacturing, and even less to information and communication services.

This reflects not only the hollowing out of Australian manufacturing, with fewer opportunities for productivity-boosting research collaboration, but also the absence of coordination across the national research and innovation system.

The Universities Accord review called for a ‘multi-agency’ approach to address the longstanding fragmentation of R&D programs and priorities.

The turbo-charged ambition of the government’s Future Made in Australia initiative makes this task all the more urgent.

Emeritus Professor Roy Green AM is Special Innovation Advisor at the University of Technology Sydney and a member of the Board of CSIRO.

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.