Research and development can be a powerful economic tonic, returning three dollars for every dollar invested in early research. But for all the hype around Australian innovation, the past two decades have seen a worrying downward trajectory in both funding and output.
Words by Larissa Foster
This article was originally published in the February 2025 issue of create with the headline “Under development”.
“Scientists believe when we invent something we’ve done 99 per cent of the work,” said former CSIRO CEO Larry Marshall at last year’s Climate Smart Engineering conference. “As engineers, you probably feel the opposite.
“The invention is maybe one per cent of the work and the [remaining] 99 per cent is turning the invention into a solution: something that you can deploy.”
And that is Australia’s valley of death, he said, where funding for early-stage technologies is insufficient to advance them to the point of practical usage.
What do the numbers say?
BNNT Technology’s Gary Walsh thinks Australia’s success will be tied to finding our place in the global innovation ecosystem.
“Internally, I think we like to see ourselves as small America,” he told create. “Externally, I think we’re seen as a large Fiji. We probably sit somewhere in between.”
Yet OECD data shows Australia’s gross domestic spending on R&D investment stands at 1.7 per cent of GDP. That’s 40 per cent less than the OECD average and far short of the 3 per cent benchmark touted by nations such as Germany, Japan and the US.
As revealed by the latest Australian Innovation Statistics, released in October, the Australian Government’s investment in R&D has fallen even further, from 0.56 per cent of GDP in 2007-08 to 0.52 per cent in 2024-25.
“R&D is an investment in the knowledge economy and vital for innovation,” Dr John Howard, Executive Director at the Acton Institute for Policy Research and Innovation, told create. “It’s important Australia invests in R&D because it can’t just rely on it being done in other countries.”
Australia’s overall R&D investment peaked in 2008 at 2.24 per cent of GDP, close to the OECD average of 2.28 per cent, just before the global financial crisis. The subsequent 16 years have seen it decline due to a loss of confidence among Australian businesses, among other reasons.
“Other countries conversely used the GFC as a trigger to increase their R&D investments,” Howard said of our outlier status.
The transformational power of R&D has been proven. According to Science and Technology Australia, early-stage research returns more than three dollars for every dollar invested, while research further along the innovation pipeline offers a more than five-fold return.
Investment in this space offers an economic power-up for nations willing to put their money, time and expertise on the line. So why does Australia lag in the face of self-evident gains?
A complex set of reasons for our outlier status coalesce around barriers within the innovation process in the context of the Australian industry’s structure, market dynamics, business culture and the policy landscape.
Valley of death
Australia is well-known for world-class research performance. Yet publicly funded research and successful innovation in the laboratory is not being translated into commercial outcomes.
The Global Innovation Index 2024 put Australia in 23rd place, behind nations such as top-ranked Singapore, the US, China and Switzerland, despite excelling in the quality of its universities (third) and the impact of its scientific publications (sixth).
While our universities undertake a disproportionately large share of the nation’s total R&D effort (nearly 40 per cent, according to the Innovative Research Universities, a coalition of Australian public universities), translation of groundbreaking ideas to commercial outcomes – between Technology Readiness Levels (TRL) 3 and 7, or proof of concept to proof of scale – meets its demise in the gulf between the lab and industry.
According to the most recent statistics from the OECD, Australia ranks last among OECD nations for industry-research collaboration.
For Engineers Australia Acting Chief Engineer Bernadette Foley FIEAust CPEng EngExec, it’s important to acknowledge Australia’s unique innovation ecosystem while tackling the challenge at hand.
“An important factor is that the connection between universities and industry differs from countries where industry carries out more R&D than currently occurs in Australia,” she said. “We’re operating in a different environment to some of the countries that are seen as leaders in this area. Anything we can do to strengthen the ties between universities and industry, the better.
“Overall, we don’t have a robust system which provides flexibility for all the different agents in the system to work together and to incentivise the outcomes that we need. That goes back to incentives and funding.”
Practical engagement
Gary Walsh is well-versed in the real-life challenges of evolving research from the lab to the market. His focus on assisting universities to take new technologies to market saw his company, BNNT Technology (since sold to PPK Group), sign a 20-year licence with Deakin University in 2018 to commercialise its patented process for producing boron nitride nanotubes.
“The timeline between having an idea and being able to make it at scale is one thing, but then there’s a whole new timeline in trying to get it into uses and practical applications,” he said. “With our product, it’s like having plutonium in the 15th century – you’re so far ahead of the curve. The science in making it is one thing, but incorporating it into new products is a whole new science that’s still being developed.”
Walsh has seen first-hand the philosophical and practical gulf between researchers and industry: “Sometimes getting a patent is considered commercialisation enough. It’s up to the student who developed the idea to canvas someone who wants to do a collaboration with them. They haven’t got the business experience to walk into a meeting and represent themselves well in the commercial world.”
This needs to be better structured if Australia wants to maintain control of its creations.
“It’s slowly progressing, but there’s no clear roadmap – everyone is going off in their own manner. We need to not only create but actively commercialise intellectual property, or we could face the next global tech giant being born in one of our world-class universities, but owned offshore.”
This can be seen in recent innovations such as the BiVACOR total artificial heart. Though conceived by Australian biomedical engineer Daniel Timms, and the recipient of a $50 million grant from the Australian Government, the company derives the majority of its funding from American private equity firms. It’s now headquartered in the US with an “international” office on the Gold Coast.
Risk and reward
Professor Iven Mareels, Pro Vice-Chancellor Innovation and the Executive Dean of the Institute for Innovation, Science and Sustainability at Federation University, argues that universities in Australia were not conceived to commercialise innovation and the “publish or perish” mentality turns research publication into a self-justifying endgame.
His own experience developing the technology behind autonomous irrigation supply systems with ASX-listed Rubicon Water, where he is a non-executive director, shows the stamina needed for the journey from idea to fruition.
“We worked together for 25 years on the R&D path. Rubicon kept investing to make sure they were leading the world in this space, and it bore fruit. Essential to our collaboration was having a champion in both industry and in the university.”
Despite the example offered by Rubicon’s success, Australian industry was more willing to be early adopters than developers of innovation.
“There are very few companies where true, fundamental research without an outcome in sight can be funded. We are not comfortable taking that risk and, as a consequence, we do not get the commercial benefits either. Very few companies in Australia have made it all the way to real commercial success, partly because of that lack of willingness. To make market impact, you have to go elsewhere, so we often see ideas and talent disappear overseas.”
University commercialisation programs such as the University of Melbourne’s Translating Research at Melbourne (TRAM) – a self-described “gateway to research entrepreneurship and industry engagement for ambitious researchers” – are a green shoot in the commercialisation landscape.
“Sometimes it’s not the shortage of money as such, but the absence of structures to make it possible. A program like TRAM provides the safety of a university, but still the ability to do something risky and wild. It’s the classic thing of one per cent idea and 99 per cent sweat.”
Innovation in Australia would also benefit from industry participating in setting the national priorities for research funding, Mareels said, and being at the table when funding decisions are made.
National strategy
Howard is vocal on the need for a coherent national strategy to boost R&D investment.
He argues that the decline in private sector R&D and growing reliance on higher education for R&D investments has seen a shift in research priorities that leaves Australia at a global disadvantage. Health and medical sciences, which are closely aligned with traditional capabilities of higher education, have been prioritised over a broader range of industrial and technological innovations.
“Other nations take their commitment to R&D investment much more seriously than we do. The only Commonwealth policy for investing in private-sector R&D is the Research and Development Tax Incentive, which has mixed results.”
There are also structural issues in the economy, which is very much service-orientated.
“We do nothing to attract global corporations to Australia to conduct R&D. Other countries use their foreign direct investment lever, whereas we don’t,” he said.
Companies bucking the general decline in private sector R&D include biopharmaceutical giant CSL, technology companies such as Atlassian and certain areas of advanced manufacturing in fields including robotics, data analytics and sensors. Even then, he notes, companies like Atlassian offshore much of their R&D.
Australia’s R&D slant towards the higher education sector is seeing some entrepreneurial translation, evidenced particularly at former institutes of technology such as RMIT and UTS where specialised facilities have been established for testing and scaling with industry collaboration.
“When industry make their global R&D investment decisions, they go to places that offer them the best deal in the broad sense, and they tend to be places that have skin in the game. Like the Monash-Moderna Quantitative Pharmacology Accelerator, which is a public-private partnership. You can’t just sit there saying we’re great at research, come to us.”
The success of this hub and Victoria’s Synchrotron shows the effectiveness of state governments with the political will to effect change.
“State governments control a lot of levers such as land use to set up an innovation ecosystem,” Howard said. “The Federal Government is less willing to take such risks.”
The role of government
The Australian Government has been vocal in its policy objectives to increase collaboration and commercialisation to grow revenue and build industry, but one of the greatest success stories at a federal level was started 34 years ago.
The Cooperative Research Centres (CRCs) fund collaborations between industry, researchers and end users, with a focus on the application of research. This shows that the government can play an important role in facilitating the translation from lab to market by supporting conditions to de-risk innovation and commercialisation.
“CRCs have shown their potential to make and provide opportunities for universities and industry to collaborate together on specific needs,” Foley said.
Each CRC is industry-led and created for a particular purpose. Success stories to date include HEARing CRC, which developed innovations that enhanced Cochlear’s medical devices, improving the quality of life for millions of people globally.
To enable the future workforce to better support Australia’s battery industries, the Future Battery Industries CRC is funding 40 PhD students. It brings together 74 industry, academic and government partners and 180 researchers.
“I think the key is that the success of each CRC is very much dependent on the research: how it’s structured and how it’s governed,” Foley said. “With both industry and government putting money in, you end up with a far better outcome overall.”
In December last year, Science Minister Ed Husic announced a year-long strategic examination of research and development (R&D) in Australia, and why national effort has been falling.
“R&D investment is one of those things that drives future economic strength,” he said. “Over the last 20 years, and especially the last decade, our performance has been slipping. There has not been a thorough comprehensive examination of what has happened and how we can improve things. This is particularly concerning for Australia, because we’re a scientific powerhouse.
“Our researchers regularly come up with new know-how that changes the world, not just for Australians but for people across the globe.”
The road to reform
Meanwhile, the Australian Universities Accord, released last year, represents the biggest review of the national university sector in 15 years.
The Accord outlines the need for an overhaul of existing policies and programs to support collaboration between universities, the government and private sector, and increasing investment in higher education and research. To that end, it proposes the creation of a Solving Australian Challenges Strategic Fund to promote universities delivering greater impact from their research.
As a result of the Accord, the federal government has committed to creating a Tertiary Education Commission to advise on measures including “mission-based funding” for institutions. The Accord also promotes the translational mechanism of industry-based PhDs, the first round of which closed in August with $300 million funding 1800 PhDs. They also enjoy the support of Engineers Australia as a practical measure for turbo-charging industry-university collaboration.
“Rather than those PhDs being carried out in a university, they’re sponsored by and undertaken in industry,” Foley said. “It’s connected absolutely with universities, but it’s a different type of model, which means those undertaking that higher degree have an industry perspective in how they’re actually delivering from the very start.
“It talks to the research not just sitting within the university sector and within academia, but also being used to advance practice from an industry perspective. In this context, we could potentially be looking at translating some of the more innovative research practices to a broader audience.”
R&D towards a net-zero future
With the climate crisis comes challenges and opportunities to become a nation of creators rather than consumers. As recognised in the Universities Accord, the pathway to net-zero emissions presents opportunities for industrial transformation, new jobs and enterprises, and productivity growth which require new or significantly enhanced skills from the workforce.
And, it would seem, the will from industry to put their money into investigating new green technologies en route to a decarbonised future is growing.
Zoe Whitton, Managing Director and Head of Impact at climate change and investment firm Pollination, has seen empirical evidence that Australia’s appetite to invest in green technologies with a risk profile is growing.
“There’s a gap here where finance is increasingly saying we would love to invest in new green things, within a certain risk tolerance of uncertain returns,” she said. “And the economy says we don’t have many of those yet. We have investors everywhere who are very, very interested in investing in green things.”
Time is pressing, and courage and vision are needed to position Australia as a global destination point for net zero and decarbonisation technology.
“We need innovative and critical thinking to inform and lead the energy transition,” Foley said. “Engineers will need to draw heavily on their ability to innovate, including creating or tapping into advanced technologies, to be able to fulfil the nation’s energy objectives. This will take concerted effort, however engineers are well-positioned to plan systems for the future in parallel with continuously evolving technologies.”
Further reading
