Thank you for the opportunity to set out very clearly the Go8’s strong views on this vital subject. We have the greatest respect for the Productivity Commission’s intent regarding this matter.
This makes the Go8 universities that I represent both enthused and relieved that finally the criticality of what we do within our universities – and in particular our research-intensive universities – is being taken seriously as a central driver of Australia’s productivity.
And here I refer to Research and Development, Innovation and of course Education.
I do not make that comment lightly.
These areas are at the heart of what the Go8, through our high-quality professional graduates, our researchers and our commercialisation teams can, and do, deliver.
And I don’t say it lightly either, that frankly Australia cannot deliver the productivity growth it must do without us.
The Group of Eight’s submission to the Productivity Commission combines the expertise of economists from across Go8 universities, seven of which are ranked in the world’s top 100.
There’s no argument from our leading economists that Australia, and indeed nations around the globe, are facing significant economic challenges. Australia’s research-intensive universities are committed to being part of the economic solution.
Indeed, we strongly believe we are integral to the solution.
Productivity is the only long-term factor driving living standards.
We know that long‑term productivity growth relies on innovation and human capital. Australia must invest more in knowledge creation and human capital if we are to have profitable and innovative businesses, secure high‑wage employment, and address challenges such as an aging population, climate change, and national security needs.
This is core to a future Australian economy that is more diverse, complex and robust as will be demanded to be successful as a nation into the 2020s and beyond.
The Go8’s submission sets out recommendations to boost productivity growth and put Australia in a strong position to face the challenges ahead.
Turning to research:
Investment in R&D is critical and will deliver substantial economy wide returns, yet R&D investment has been patchy, and our research effort is moving away from all-important basic research.
It is unacceptable that Australia lags behind our competitor nations by so much and has done for so long.
It casts a pall over any chance of being a more sovereign nation, or of every Australian having access to the living standards they should expect, from what was once known as the lucky country.
Basic scientific research is a key driver of innovation and productivity.
Innovations don’t occur in a vacuum – they rely on basic scientific research as we’ve seen recently with the rapid development of COVID-19 vaccines.
The International Monetary Fund in examining post COVID-19 pandemic strategies for boosting long-term growth highlighted the critical importance of basic research, and I quote “Basic scientific research is a key driver of innovation and productivity, and basic scientific knowledge diffuses internationally farther than applied knowledge.”
Importantly the IMF found that a 10 percent increase in basic research is estimated to lift productivity by 0.3 per cent on average. It also says that basic scientific research in advanced economies is underfunded.
To gain any productivity momentum, it therefore appears logical that we must change what has occurred in other areas of the economy over past decades; while at the same time involving the committed Go8 far more in the recovery process.
The Government’s share of total R&D has been in decline since the mid 1990’s.
And business is also moving away from funding research.
It gives me no pleasure to criticise the business sector but it deserves criticism.
Since 2008 – the GFC – business expenditure on R&D as a share of total national R&D fell 10 percentage points by 2020 to 53 per cent of total R&D expenditure.
As our submission sets out, business has been, and continues to walk away from funding research and it is universities which are picking up the slack – and Go8 universities in particular given we undertake 70 percent of all university-based research in Australia.
In contrast to BERD, HERD as a per cent of GDP has risen from 0.54 per cent in 2008 to 0.61 per cent in the survey conducted by the ABS in 2020 – significantly higher than the OECD average of 0.44 per cent of GDP.
It may surprise you to know that in Australia the Go8 universities alone almost meet the OECD average for higher education spending on R&D (HERD) as a per cent of GDP.
That lopsided commitment is not good enough by anyone’s standards surely?
It should also be noted that Government is commissioning national research from universities while only paying for less than half the costs.
This requires universities – primarily the Go8 – to support the national research effort using their contingent funding – mainly international student fee revenue.
Again, not good enough.
We are recommending the adoption of a Full Economic Costing model, bespoke to the Australian context and one which reduces the reliance on cross subsidies from student fee income.
And this decoupling is important if we are serious about building sovereign capability. COVID-19 has shown, very clearly, how important industries can be disrupted due to a range of external factors, not of Australia’s making.
So, the key question we need to ask ourselves is this: given the criticality of an active and high-quality R&D sector to Australian prosperity, are we comfortable allowing this to be reliant on external forces that lie beyond Australia’s control?
Expenditure on HERD is beneficial from an economy-wide productivity perspective – for every $1 billion invested in Go8 university research, an estimated additional in-year economic output of $9.2 billion is generated across the rest of the Australian economy.
And it’s not us saying that – these figures come from an independent assessment conducted by the highly respected firm London Economics, which will be released shortly.
The Government has set a target to lift investment in R&D expenditure to 3 per cent of GDP – challenging in the current economic environment but strongly supported by the Go8.
A National Research Strategy as recommended by the Go8, which targets spending where it delivers the greatest return and best targets national priorities, will support this goal.
The Strategy should prioritise funding for basic or blue-sky research, improve incentives for universities to conduct basic research, support industry and university collaboration on R & D, support access to international collaboration and funding such as Horizon Europe, and review the R&D Tax Incentive Scheme – so that it truly incentivises collaboration and additional research.
Also critical to productivity is a skilled and educated workforce – nothing can be achieved without it.
You will note that in our submission we propose abolishing the Job Ready Graduates scheme.
It was out of touch and unrealistic when introduced and frankly it is highly questionable whether there was any depth behind the reasoning.
All it has succeeded in doing is damaging future productivity growth by erroneous funding focus and denying what is required for the nation’s good.
The Go8 raised concerns about the previous government’s Job-ready Graduates package from the outset. We said it wasn’t fit for purpose then and the recent National Skills Commission report has more than confirmed that.
The JRG actually acts as an impediment to skills creation – it created disincentives for universities – particularly in relation to STEM courses, such an engineering and IT, which are already experiencing critical shortages.
Universities have been required to teach more with less.
Internal Go8 estimates at the commencement of Job-ready graduates indicated that by 2024, Go8 universities will be expected to teach an additional 5000 equivalent full-time students with a decrease in base funding of almost $100 million.
Frankly, in the current climate, Australia cannot afford to waste our time and limited resources on models or policies that have proven to be ineffective. No less than the prosperity of our nation is at stake.
Therefore, once again. the Go8 recommends that the JRG be abolished in favour of a simpler model for university teaching funding by having a fixed student contribution and a Commonwealth contribution to reflect the variability of qualification costs.
In closing, I want to emphasise the importance of the Universities Accord – it’s an opportunity to address many of these recommendations
- to look at genuine funding reform so government and taxpayers get the best possible value;
- to review current legislative and regulatory barriers to productivity;
- and to develop a university sector that can meet the 21st century needs of Australia.
With the right policy levers, universities can be leaders in Australia’s productivity revival.