Go8 Universities 2026–27 Pre-Budget Submission

January 29, 2026

The Treasury

Introduction

The Go8 universities are a cornerstone of Australia’s economy. As the nation’s leading research-intensive institutions, they deliver more than 20 percent of Australia’s total investment in research and development (R&D) – contributing $8.5 billion annually to our knowledge economy. This R&D has significant public value and is in the national interest.

Each year, Go8 universities educate more than 120,000 high-quality graduates, including in high-demand STEM related fields such as engineering, health, mathematics, and computer science. These graduates form the skilled workforce that Australia’s economy and essential services depend upon.

The Australian Government’s Economic and Fiscal Strategy sets a clear goal of “strong, inclusive and sustainable economic growth” underpinned in part by “investments that grow the economy and expand productive capacity”.^[1]

If the Government is serious about realising this ambition, then acting on the recommendations in this submission will provide precisely the kind of strategic investments that expand Australia’s productive capacity, lifts long-term economic growth, and – critically delivers improved health outcomes for Australians.

Urgent reform is needed

Australia’s university research funding system is broken.

Both the Universities Accord and the Strategic Examination of Research and Development (SERD) have made this clear – the evidence is in from these independent reviews.

Following the findings of these major reviews, it is incumbent on the Australian Government to act.

Without reform, the deficiencies of the current system will continue to act as an unnecessary brake on Australia’s research and innovation capability, and in turn hamper Australia’s productivity, economic growth, and competitiveness.

There is now real urgency. The longer the Australian Government delays fixing the research funding system, the worse the impact on our long-term standards of living. This is because we will be limiting the very source of long-term prosperity – the creation and application of knowledge that translates into innovation and productivity improvements.

Fixing the system requires a suite of reforms – many of which the Go8 has raised with the SERD and with government more broadly. It will take more than one Budget cycle to fix the system – but a critical reform that should begin in the 2026-27 Budget is a transition toward public funding of university research meeting the full economic costs of research.

Full economic costs (FEC) include costs indirect or “overheads” costs such as energy, infrastructure and building maintenance. Increasingly, universities are under pressure to cover the indirect costs on top of co-contributions to the direct costs of research. The Go8 estimates that on average $1.19 is required to support indirect costs of every $1 of direct research income.

The consequence is a long-term squeeze on the financial viability of essential research that underpins Australia’s productivity and innovation. It has also driven increasing reliance on uncertain and volatile alternative income – particularly international student revenue. The current system is not only broken; it is not financially viable.

The 2026-27 Budget also provides the opportunity to further boost Australia’s research and innovation system by unlocking additional funds from the Medical Research Future Fund (MRFF) and, if not completed, provisioning funding for Australia to become an associate member of Horizon Europe.

The budget cost of each recommendation will obviously depend on the specific implementation approach taken by the Australian Government and, in the case of Horizon Europe, ongoing negotiations with the European Union.

Discussion

Full economic costs of publicly funded research

At the time of writing, the final recommendations of the SERD have not been released. However, the Australian Government is expected to publish both the recommendations and its response shortly. It is therefore essential that the 2026-27 Budget includes funding measures aligned with the SERD recommendations.

A central issue identified by both the Universities Accord and the SERD is the need to properly fund the full economic costs (FEC) of publicly funded university research.  As the Accord final report states “More needs to be done to fund the full economic cost of research” and that “a mature publicly funded research grant system incorporates a funding principle that indirect costs of research must be factored into the system to accompany any direct research investment expansion”._^[2]

The SERD also identifies the increasing pressure on existing public research funding models driven by a widening gap between competitive grant funding and indirect cost support. Competitive R&D grants rose 157 per cent in real terms between 2001 and 2023, while the systemic cost funding grew by just 45 per cent over the same period.^[3] This imbalance is clearly unsustainable and has forced universities to rely heavily on other, more volatile revenue sources – including from international student income – to sustain essential research activity.

Further compounding this problem, the Australian Government itself cross subsidises university research across portfolios. For example, funding from the Education portfolio is used – often inadequately – to support the full economic costs of health and medical research primarily funded by the Health portfolio.

To begin addressing this structural funding gap, the Go8 recommends that the 2026-27 Budget:

• Commence transitioning toward FEC coverage for publicly funded university research grants, reducing the reliance on discretionary income such as   international student revenue.
• Ending cross-subsidisation across Government portfolios by requiring each grant funding agency to contribute to the FEC of university research it supports.

There are various ways this recommendation can be implemented. One option identified in the Universities Accord final report for “creating a pathway towards funding more of the full economic cost of research” is to strengthen the Research Support Program (RSP) so that it provides explicit indirect cost support tied to national competitive grant schemes.

Under this approach, the RSP would provide a base level of support for indirect costs, with funding increasing over time to a target of 50 per cent. (Go8 analysis indicates the RSP currently covers only around 18 per cent of research income). The Australian Tertiary Education Commission (ATEC) would periodically review this target.^[4] Complementary changes would be required to Australian Research Council and other national competitive grant funding rules to ensure each grant includes fixed indirect cost support.

The SERD may also have a preferred approach in its final recommendations to addressing the FEC shortfall and the Go8 is ready to engage with the Government on fixing the system.

Transitioning to a system that fully covers FEC will likely require establishment of a robust and transparent costing model for university R&D, informed by international best practice such as the UK’s Transparent Approach to Costing – Research (TRAC). The 2026-27 Budget should therefore provision establishment funding, resources for universities to supply the detailed cost information required for the new model.

Unlocking additional funds from the MRFF by removing the $650 million annual expenditure cap

The 2026-27 Budget must take action to release unspent funds from the MRFF — funds that could immediately support critical, life-saving research and generate substantial economic and social benefits through strengthened health innovation.

In the 2025-26 Budget the Government allocated $650 million in MRFF funding — over $400 million below the $1.055 billion Maximum Annual Distribution Amount authorised by the Future Fund Board of Guardians for that year.

Maintaining the $650 million cap will result in a real‑terms cut of 12 per cent to medical research funding through to the end of the forward estimates in 2028–29, even as the MRFF itself grows to nearly $27 billion over the same period.

Parliamentary Budget Office (PBO) modelling reinforces the scale of this missed opportunity.  

If annual disbursements remain capped at $650 million, the MRFF will grow to $35.4 billion by 2035-36.^[5] Lifting annual disbursements to $1 billion per year would be well within the breakeven funding disbursement of approximately $1.4 billion per year.

Holding back MRFF funding is the very definition of a false economy.  While investment in health and medical research can be deferred, the negative health impacts on the Australian community that the unfunded research could have prevented or mitigated – cannot be deferred.

The economic cost of this cap is stark. Every dollar invested in medical research and development returns $3.90. With an underspend of approximately $1 billion over the past three years, Australia has forgone an estimated $4 billion in economy-wide benefits.

Provision funding for associate membership of Horizon Europe

Horizon Europe is the European Union’s flagship research and innovation program with the next iteration of the program (2028 to 2034) expected to have a budget of €175 billion.^[6]

The 2025–26 Budget already provisions for the Australia-European Union Free Trade Agreement, which remains under negotiation.  At the same time, the Australian Government’s exploratory negotiations with the EU in 2025 for associate membership of Horizon Europe marked an important milestone in unlocking the potential of Australia’s research and development system to further deliver tangible benefits to Australians.

Associate membership of Horizon Europe will provide benefits for Australia:

• Enabling Australian universities, businesses, and researchers to take leading roles in global collaborative research projects.
• Providing access to resources, networks and financial support that elevate Australia’s research and innovation capabilities, helping us reach new markets and achieve greater impact than would otherwise be possible.
• Opening markets, speeding up commercialisation, guaranteeing access to advanced data and infrastructure, and expanding the reach of our innovation nationally and globally.
• Strengthening Australia’s role in the Asia–Pacific within Europe’s strategic priorities, as Europe actively seeks deeper engagement with the region.

Australia’s current limited access to Horizon Europe has resulted in missed opportunities, stalled collaborations, and unrealised impact – issues demonstrated in multiple Go8 case studies.  Associate membership would remove these barriers and ensure Australian researchers and businesses can operate at full capacity within one of the world’s most substantial research ecosystems.

The Australian Government should continue to pursue negotiations for associate membership of Horizon Europe and, if this has not already been done, the 2026-27 Budget should provision for necessary funding for membership.

Conclusion

Over the past several years, the Australian Government has rightly focused on identifying reforms to boost Australia’s weak productivity growth. Central to this reform agenda have been the Universities Accord and the SERD – both of which clearly identify the need for Government to address the long-standing shortfalls in meeting the full economic costs of publicly funded university research. The current system is broken and not financially viable. The Go8 stands ready to work with the Australian Government to fix it – because doing so is essential for the nation’s long-term prosperity and wellbeing.

The 2026-27 Budget should commence the transition to meeting the full economic costs of publicly funded university research. This will require initial investment in the establishment of a robust and transparent costing model for university R&D, underpinning the system‑wide reform that is now overdue

Health and medical research and innovation is one of Australia’s strengths. The 2026-27 Budget also provides the opportunity to unlock additional existing funding disbursements from the MRFF – delivering economic and social benefits to Australians, while preserving the fiscal sustainability of the fund.

The associate membership of Horizon Europe should also not be missed. Negotiations with the EU should continue with a view to securing membership and ensuring that the 2026-27 Budget provides for the required funding.

Taken together, these reforms represent sound, strategic investments that align squarely with the Australian Government’s Economic and Fiscal Strategy – expanding Australia’s productive capacity and achieving strong, sustainable economic growth.

[1] Source: Mid-Year Economic and Fiscal Outlook 2025–26 (MYEFO), The Commonwealth of Australia.

[2] Source: https://www.education.gov.au/australian-universities-accord/resources/final-report, p. 216.

[3] Source: https://storage.googleapis.com/converlens-au-industry/industry/p/prj3708900aab024c1d7431f/page/serd_issues_paper_5_foundational_research.pdf, p. 4.

[4] Source: https://www.education.gov.au/australian-universities-accord/resources/final-report, p. 31.

[5] Source: https://www.pbo.gov.au/publications-and-data/publications/costings/alternative-mrff-disbursements-allocated-ten-year-medical-research-plan

[6] Source: https://commission.europa.eu/strategy-and-policy/eu-budget/long-term-eu-budget/eu-budget-2028-2034_en