Go8 submission to the SERD issues papers 5 & 6

October 10, 2025

Strategic Examination of Research and Development Secretariat

Group of Eight Universities (Go8) submission to the Strategic Examination of Research and Development (SERD) issues papers open for comment until 10 October 2025

Introduction

Foundational research undertaken Australia’s university system underpins the nation’s entire research and development (R&D) ecosystem. Through the generation of ideas across disciplines and the development of a highly skilled research workforce, Go8 universities form the backbone of R&D efforts across both business and government sectors.

Go8 members conduct 70 per cent of all university research in Australia and account for over 20 per cent of the country’s total R&D investment.

Within the higher education sector, Go8 universities contribute two-thirds of foundational research investment – amounting to more than $3.1 billion annually, compared to $2.5 billion from the entire Australian business sector.

To ensure Australia becomes and remains a knowledge driven, innovative economy, it is essential to sustain and strengthen this foundational research base. A key challenge is increasing business investment in R&D from its current level of 0.9 per cent of GDP to (at least) the OECD average of 2 per cent of GDP.

Without this uplift, Australia risks falling behind global innovation leaders.

Systemic Challenges

Despite the world class quality of Australia’s university research, the current system is burdened by cross-subsidies that distort the system and create vulnerabilities – particularly in relation to international education revenue. For example:

Government research grants (e.g. ARC, NHMRC, MRFF) do not cover the full economic cost of research, requiring universities to rely heavily on so called “discretionary” income, including international student revenue. In total, the university sector sourced over half of its research expenditure from non-governments sources. Without this cross subsidy, public research programs for universities as currently configured would collapse.
Government itself cross subsidises university research between portfolios with, for example, funding from the Education portfolio (inadequately) supporting the full economic cost of health and medical research through the Health portfolio.

As a result, we have a system which does not know the full economic cost of the research activity it funds, with government funders eschewing the responsibility of (partially) supporting the full economic cost to either university discretionary revenue or shifting it to another government portfolio.

Without clear price signals reflecting the true cost, it remains challenging for both business and government to accurately assess the level of investment required to achieve high quality research outcomes – and to understand the return on that investment. .

This underscores the urgent need for central coordination of Australia’s R&D system through an overarching government agency. The current fragmentation is evident in the multiple initiatives underway including the SERD, the development of a National Health and Medical Research Strategy, and major reforms to the Australian Research Council’s National Competitive Grants Program. In parallel, the Economic Reform Roundtable has also considered innovation enhancing reforms.

A central coordinating agency should play a pivotal role in ensuring that university research is not only excellent but also strategically aligned with national priorities and the development of sovereign capability.

Despite the structural challenges outlined, Australia’s university sector continues to demonstrate world-leading research capability and capacity. Go8 universities alone invest $8.5 billion annually in research and lead the sector in commercialisation outcomes. In 2023, Go8 institutions generated $93 million in commercialisation revenue—representing 92 percent of the sector total and outperforming the CSIRO. This figure equates to 4 percent of applied research revenue, compared to just 0.6 percent across non-Go8 institutions.

This investment strengthens Australia’s innovation ecosystem and boosts national productivity by enhancing the country’s knowledge capital. The impact is tangible – ranging from lifesaving medical breakthroughs to advancements in renewable energy technologies.

However, this success must not breed complacency. The SERD has made clear that Australia is falling behind global peers in research, development and innovation (RD&I). It also highlights the growing strain on foundational research funding, with a widening and growing gap between grant allocations and indirect cost support.

If Australia fails to significantly improve its RD&I performance, the consequences will be profound: slower economic growth, reduced business profitability, stagnating real wages, rising living costs, and diminished capacity to invest in social, environmental, and sovereign priorities.

Reform must be bold and purposeful if it is to deliver meaningful change. A critical first step is for the Australian Government to establish a central R&D coordination body – one that can provide strategic oversight of funding, focus and governance.

As a leading example, the Government should also ensure that funding from the Medical Research Future Fund (MRFF) is deployed to its fullest potential, maximising the impact of high-value research.

The SERD acknowledges universities produce valuable innovation, but achieving commercial outcomes requires attention. Achieving this requires targeted government support to build scale in university technology transfer—similar to the UK’s Higher Education Innovation Fund—and to foster genuine two-way mobility of talent between academia and industry.

Go8 recommendations

The Go8 supports the overall direction of the SERD issues papers, particularly the recognition that competitive R&D grants have grown disproportionately compared to systemic cost funding—resulting in a shortfall in indirect cost support. We also welcome the emphasis on securing long-term investment in research infrastructure, the value of enabling research specialisation, and the importance of protecting curiosity-driven research.

However, the effectiveness of reform will depend on the detail. In response to the issues papers, the Go8 puts forward the following headline recommendations:

Establish a Central R&D Coordination Body: Create an overarching Australian government agency for research and innovation to lead the development of a long-term decadal RD&I strategy. This agency should oversee major research funding agencies including the ARC, NHMRC and MRFF.
Eliminate Inefficient Cross-Subsidies in the R&D System.
1. Transition toward full economic cost (FEC) coverage for publicly funded research grants to reduce the reliance on discretionary income, particularly international student revenue.
1. End cross-subsidisation between Government portfolios by requiring grant funders to contribute to the FEC of research they support.
Protect and Promote Basic Research and HASS Disciplines: Ensure that the overarching R&D agency includes support for basic research and research in the humanities, arts, and social sciences (HASS) as a core part of its mission.
Encourage Institutional Diversity and Specialisation: Support a model that enables universities to differentiate by mission, scale and focus – driven by excellence and aligned with national sovereign capability needs and Government priorities.
Implement a Transparent and Fit-for-Purpose R&D Costing Framework: Develop a robust and transparent costing model for R&D, informed by international best practice such as the UK’s Transparent Approach to Costing – Research (TRAC).
Use Government Procurement to Drive Innovation: Position the Australian Government as an exemplar by introducing a Small Business Technology Transfer (STTR) Program linked to its procurement system, fostering collaboration and innovation.

Further detail and rationale for these recommendations are provided in the attached discussion paper.

Conclusion

The generation and sharing of knowledge—particularly through research-intensive institutions like the Go8—is essential to Australia’s long-term productivity, innovation, and economic resilience.

The SERD presents a pivotal moment. We must seize this opportunity to establish a national, decadal RD&I strategy that delivers a coherent and coordinated approach to funding, focus, and governance.

The time to act is now. Without decisive reform, Australia risks falling further behind global innovation leaders. We cannot afford to delay. The recommendations outlined in this submission provide a bold and practical roadmap to strengthen foundational research, enhance commercial outcomes, and ensure government plays a leading role in driving national capability.

Attachment: Discussion of Go8 recommendations

1. Establish a Central Government Agency for Research and Innovation

The Australian Government should establish a single overarching agency to lead a whole of government approach to research and innovation policy and funding. This body would be responsible for developing and implementing a national decadal RD&I strategy and coordinating funding across key agencies including the ARC, NHMRC, and MRFF .

Currently, Commonwealth level RD&I efforts are fragmented across portfolios such as Industry, Science, Education, and Treasury (e.g. the R&D Tax Incentive). A central agency would streamline these efforts, reduce duplication, and foster collaboration across the research ecosystem. It would also simplify access to funding for foundational, mission-driven, and industry-linked research, while enhancing public engagement and advocacy for research.

Importantly, the agency should support both short-term RD&I growth and long-term transformation by increasing industry’s absorptive capacity—through direct collaboration and a research-trained workforce.

2. Eliminate Inefficient Cross-Subsidies in the R&D System

Move toward full economic cost (FEC) coverage for publicly funded research grants to reduce reliance on discretionary income, particularly international student revenue
Remove cross-subsidisation between Government portfolios by requiring grant funders to provide support for the FEC.

Structuralreform is needed to remove economically inefficient cross-subsidies that undermine the sustainability of Australia’s R&D system.

These reforms will take time and investment, and must be led by the proposed central R&D agency. As an interim measure, a premium rate of indirect cost support could be introduced for translational research and projects aligned with government priorities.

3. Protect Basic Research and HASS as a core mission of the overarching R&D agency.

The national RD&I strategy must explicitly safeguard funding for basic research—including in the humanities, arts, and social sciences (HASS). These disciplines are essential to a well-rounded innovation system and must be recognised as core to the mission of the new agency.

4. Enable Greater Institutional Specialisation.

Australia’s research system should support a diversity of missions, scales, and focus areas among universities. Funding and policy settings should encourage specialisation based on excellence and alignment with national priorities and sovereign capability needs.

The SERD acknowledges that most Australian universities conduct research across a wide range of fields, which can dilute impact. One proposed solution is to reform funding and policy to enable greater institutional specialisation.

The Go8 supports this direction. Australia should foster more targeted research efforts and deeper collaboration across the full spectrum of research—from basic discovery to applied and industry-specific innovation—at every stage of the knowledge generation lifecycle.

This specialisation must be driven by excellence and responsive to both local and national needs. Achieving this may require changes to the Higher Education Research Threshold Standards to allow some institutions to focus on a narrower, but higher-quality, research profile.

5. Introduce a Transparent R&D Costing Framework

Australia should adopt a robust and transparent costing model for research, informed by international best practice such as the UK’s Transparent Approach to Costing – Research (TRAC).

This would improve the sustainability of government research investment, provide visibility into actual costs, and send strong price signals to the broader RD&I ecosystem—enabling more efficient market responses and better-targeted government support.

6. Use Government Procurement to Drive Innovation via an STTR

The Australian Government should act as an exemplar by linking its procurement system to a Small Business Technology Transfer (STTR) Program.

This program would provide grants to small businesses to collaborate with universities in developing commercially viable products and services. Funding would be drawn from agency procurement and R&D budgets, supporting innovation aligned with specific government needs.

The key benefits of such a program include:

Lifting SME ambition and capability;
Building sovereign supply chains; and
Translating early-stage ideas into commercial products and services.