Budget wish list: R&D for Australia's future

For many years now, Australia’s investment in R&D has lagged significantly behind our OECD counterparts. Australia’s current R&D investment is just 1.68% of GDP and government investment in R&D last year reached a staggering 30 year low of 0.49% of GDP. We are far below the OECD average of 2.72% and the steady decline of R&D investment continues year on year.

Another important measure for Australia is that of our Economic Complexity Index (ECI) which gauges how resilient and diversified our economy is. In Australia, we currently sit 93rd on this measure between Uganda and Pakistan as opposed to countries such as the UK (8th), Japan (1st) and the US (14th). We remain highly dependent on our commodities, leaving us exposed to global fluctuations and risk. To future proof our economy and drive economic growth , R&D and innovation are essential to develop higher value industries and diversified exports.

We need to work toward improving both these measures and develop a long term strategy of substantial R&D investment to reach a target of 3% of our GDP, and to significantly improve our ECI for Australia's future economic outlook.

Research has shown that an additional investment of $4.4 billion each year in R&D could help Australia reach the 3% of GDP target by 2035. Research has also shown the return on investment for each dollar spent on R&D at over three times - making this a justified economic decision for our political leaders.

What do I want to see in the Australian Federal Budget 2024?

Aside from a long term, strategic R&D investment plan recognising the importance of R&D for Australia’s future, following is my wish list and what I’d do if I controlled the government’s purse strings.

1. Ongoing support for the R&D Tax Incentive and the EMDG

The R&D Tax Incentive program has enjoyed some relative stability after a few years of constant changes helping companies in planning for their R&D. Obviously we’d like to see no further changes diluting this vital program.

Similarly, now is not the time to reduce the EMDG program which is currently being re-drafted. We hope this budget will announce meaningful support for our exporters to expand their markets globally.

2. Increase investment in health and medical research spending

Australia has a reputation for excellence in medical R&D but funding to this vital sector is still lagging behind. Increasing the amount of funding in the Medical Research Future Fund (MRFF) is one measure as would increasing funding to bodies such as National Health and Medical Research Council (NHMRC) and Australian Research Council (ARC).

Investment into increasing our biotech/medtech manufacturing expertise and other infrastructure e.g. enabling GMP facilities would also benefit this sector and prevent the need for many Australian companies to go offshore for these services.

3. Green energy R&D and infrastructure

With energy prices increasing and our net zero target by 2050, we need to provide significant investment into how to make green energy affordable and efficient. Science and technology are key to overcoming the current challenges in this sector and I’d like to see more investment into hydrogen and battery technologies, and our critical minerals industry.

4. Advanced manufacturing and increasing sovereign capability

It is almost impossible for Australia to compete on standard manufacturing globally. Government funding into advanced manufacturing such as robotics, machine learning, and AI is where we can seek to bridge this gap. Investment of a capital nature by governments is essential for this goal including developing more innovation hubs and precincts, and targeted grants.

5. Training and development programs

Without a concerted program of developing the skills and training for these future jobs, these investments would be pointless. I’d like to see significant investment (including at a primary school level) to focus on these important skills and be embedded into the curriculum from an early age. And for our STEM teachers to be incentivised well and to be trained in these future skills areas.

6. Investment in women in STEM

I’m eager for more programs and grants supporting women in STEM such as female founder grants and other measures to increase female engagement in innovation. Investment in women led R&D start-ups falls far below their male counterparts and measures to address this problem for companies seeking investors needs to be addressed.

Above all else, I would like to see a real plan for Australia’s long term strategy in R&D and innovation with bipartisan support for targeted, sustained spending for the next decade and beyond to help ensure Australia’s future.