Indolent Australia's high-level R&D review will miss the target

Running 2024-25, this high-level R&D review is typical of how Australia works. In other wealthy nations, it might have had a higher profile, attracted political scrutiny and sterner debate.

Not Down Under, where our top-20% stakeholders ideate almost as one beehive. Despite its international purview, the review rather risks "talking among itself".

Fortuitously kept afloat by humungous iron (Fe) and coal-gas hydrocarbon (CH) exports, the "lucky" (seat 11-A) country mistreats its own people to an immigration-led labour-growth economy – not business-led investment-growth. Bank-lending is siphoned off to the real-estate bubble not business innovation. Top companies are dominated by banks and miners not tech.

How do you kick-start R&D, against that kind of indolence?

The review originates, 2024

The review materialised in May 2024 in the Portfolio Budget Statements for Science, seeking to "maximise the impact" from our R&D. The Academy of Science saw this as a generational opportunity for R&D to "maximise its contribution". Said the Financial Review ,business "spends bugger all".

Last December, terms-of-reference finally appeared . Review-panel leader is former Australian accountant, risen meteorically to Chair of Tesla Inc, Robyn Denholm . She was ticket 37 among 146 Treasury-anointed stakeholders at Labor's gloriously consensual (but totally dishonest ) jobs and skills summit.

Supporting Denholm are education-supremo Ian Chubb, rebounding from his carbon-credits fiasco, plus WA science-surgery icon Fiona Stanley, and startup-whiz Kate Cornick .

Science and Education Ministers immediately linked the review to Treasury's Future Made in Australia (FMIA) concept, built on UN fairy-dust of a "net-zero transformation-stream".

The quick-sticks discussion paper

Just two months later, the panel's discussion paper emerged, for two months' consultation.

Industry Group submission thought commercialisation was central. Academy of Social Sciences thought social-sciences were central. Group of Eight universities wanted 3% of GDP for R&D, fully funded research-grants, more "skilled" migrants. All talking their own books.

The paper's Executive Summary makes a conventional claim – Australia's a research ace. Up to a point, but there's too much inconsequential "research" chasing dodgy international rankings.

No quarrel, when the panel claims our economy lacks complexity, and R&D has slid. No opportunities will be "ignored" they promise hand on heart.

Their first chapter, Case for R&D, says R&D can build growth and productivity. Sure, but the absurd claim of Australia having "lower population growth" is just Treasury Line.

Solely this century, Treasury has engineered a world-beating 46% acceleration to 27 million, 40 million-plus being their target. That might help explain the Figure 1 "backsliding productivity" shock or Figure 3 "economic simplicity" horror. Under Treasury Rules, however, government reports don't make those connections. Suits stakeholders.

Then, strong R&D is in the "national interest" to address "complex challenges". Fair enough, but here comes a rerun, of Treasury's net-zero "transformation".

What's the State of Australia's R&D system? We've strong foundational research (maybe), underinvest in R&D (sure) and underdo "experimental development" (obvious).

Universities and industry are both on the same gravy-train – Treasury's quantitative-peopling not business-led economy. Why would either team bust a boiler for experimental development?

Now to Key issues, among our 40 universities, 60-plus medical or public research agencies, and other non-government research entities.

With "pressures on operating models", university revenues and R&D are linked to enrolment "patterns in student markets". Talk about economical with the truth.

Denholm stays mum, on Australia's outsized overseas-student operations. Which masquerade as our fourth largest "export" after the Fe and CH's.

It's no secret, casually-vetted cash-cow international students claim around half our massive net-migration. Giving us the highest international student-intensity of any advanced nation.

Astonishingly, with one third of 1% of world population, we carry close on 15% of the international-student trade. That's a South Seas bubble for "vice" chancellors not a sustainable industry.

With the artificial intelligence (AI) threat barely hitting second gear, this revenue-rich but financially struggling "export" model has already damaged university quality and ethics.

Australia likes directly preferring overseas students to locals, as sources of skilled workers or semi-skilled labour. Selfish Universities Australia applauds Albanese's reverse-racist agreements, preferencing Indian qualifications and students over other nations.

Not only that, our National University (ANU) and other high-end campuses are themselves tireless propagandists for "export" education. Downsizing and quality-reform of this student-boondoggle might make better sense, research-wise, but Denholm's looking the other way.

Business-led research, her paper continues, is a Good Thing, building "diversification, resilience, and growth". Relative to OECD norms, however, business-based research has plummeted since 2009, this largely attributable to "mining sector" trends.

Would you believe "stronger manufacturing" would help - I do. Would you believe FMIA can instigate that – I don't. Not when superimposed on our self-sown manufacturing landmines – steep prices for land, labour, energy, transport, and communications.

What would have been relevant here, is the potential China/US development of intelligent or smart manufacturing . Robotics and energy-heavy, but beyond Australia's ken.

The next point is our "vibrant" startup scene. Financial Review loves this stuff, seeing evidence our regressive economy is on track. Who doesn't know somebody who knows someone working at Atlassian or Canva ?

Also plausible, is that Australia "increasingly" relies on small and medium enterprises to lift business R&D, though their numbers have "contracted" since 2008.

Could this train-of-thought be leading somewhere? Not when Treasury Line smothers discussion:

Growing medium enterprises includes de-risking market adoption. Removing barriers to business dynamism and competitive pressures, encouraging firms to approach the innovation frontier, will lead to improved labour productivity.

Back then, to the slide in large-enterprise R&D. Again, why would these commonly rent-seeking companies plunge bigtime into R&D? Cupidity and oligopoly are reward enough.

The Commonwealth's R&D effort is spread "broadly and thinly". Over 2024-25 there's $14.4 billion (less than the largesse for fee-charging religious schools) across "14 portfolios and 151 programs". The biggest slice is the R&D tax incentive for businesses.

Though Australia's said to have "led the world" in developing high quality, connected, and available, R&D infrastructure, we're also a "patchwork" with gaps. Funding for institutional, versus "national-priority", versus "landmark-global", R&D infrastructure comes from multiple sources, with limited coordination.

Commonwealth R&D sits well below the OECD standard, of 2.73% of GDP. Also, we're low on the global-index of venture-capital, proportional to GDP. Hence, casual suggestions, of re-deploying our huge super-funds, or drawing down on local "philanthropy".

Collaboration across sectors is weak. Academics don't percolate much into industry, or vice versa. Also, our workforce is deemed "not aligned" to needs of the economy, particularly STEM (science, technology, engineering and maths) skills.

Panel, how come that's still true?

Since 2005, we've had a big increase in university participation, with technical training going backwards, and government insisting 55% of young Australians should have degrees by 2050. We've also had massive increases in immigration, purportedly to fix "skill shortages".

Before 2007, Australia had never experienced 200,000 annual net-migration. Yet 2022-25 will top 1.3 million, 70% higher than the previous one-term record. Pro-government influencers at ANU "Migration Hub" contort this into a "shortfall". Suits stakeholders.

The panel should be wondering, exactly how many years of unending local graduates and unlimited "skilled" migrants would it take, before our workforce would finally "align" with R&D?

Noting the likely effects of AI on R&D, the discussion paper usefully concludes with six international R&D reforms – US, Germany, South Korea, France, Israel and UK.

Maybe one or other will get a guernsey, in the final report. Perhaps Israel, also a "pioneering" desert nation, whose population resembles ours in size. They're a tad more energetic perhaps. No "netting" of Woodside or Santos gas to "zero" for them.

The review is compromised

Every year, government produces Budget Paper 3 and Population Statement. Where Treasury repeats their time-honoured fib, for stakeholders. Massive immigration isn't engineered - it just "happens".

Indeed, Treasurer and pro-government influencers insinuate Australia "isn't allowed" to manage immigration. That's more for UN/OECD/EU/IMF club, also our "free" trade agreements.

In disrespectful terms, Treasurer's ivory-tower economic directions play out somewhat like this: third-world resource-giveaways, low-wage population-replacement, government and care jobs aplenty, egotistical productivity and net-zero fallacies, overrated export-education, and incentivised real-estate speculation.

Reprising jobs summit, he's treating (consensual) stakeholders to a productivity roundtable to duck productivity questions.

By and large, this R&D review seems obliged (or chooses) to take our South Seas economic model at face value. Denholm and her panel look compromised. They'll struggle to generate the incisive thrusts our R&D effort would really need.

Having said that, perhaps they could try for: targeted increases in R&D spend, cleverer approaches to R&D infrastructure, better public-to-private linkages, fillips for the venture-capital scene, whatever. Might help at the margin.

Could this invisible investigation surprise, with a few Tesla-style zingers? Let's see. After all, ex-DOGE multi-dad Elon Musk and his company are valued at roughly 60% of a year of Australia's GDP GDP.