Home | Analysis | The ‘Economic Accelerator’ risks being more talk than torque: Why ‘Blue Sky’ research matters – opinion

The ‘Economic Accelerator’ risks being more talk than torque: Why ‘Blue Sky’ research matters – opinion

The just announced Australia’s Economic Accelerator (AEA) funding package has been widely welcomed as an extra injection of $2.2b Australian Government funding into support for enhanced ‘translation and commercialisation’ of university research.

The initiative is explained in a co-released “University Research Commercialisation Action Plan” following national consultation and advice of an Expert Panel. To its credit, AEA shows Government tackling a long claimed Australian-specific weakness: that relative to other advanced economies, Australia has world class academic research but far less effective applied translation and commercialisation systems, and hence underperforms in R&D-led innovation outcomes.  

AEA aspires to stimulate more advanced technology jobs and economic growth with its investment focus on six national manufacturing priority areas. Projects will be supported by merit based ‘stage-gate’ investments mostly facilitated through existing CSIRO-led Main Sequence expertise. The package includes $296m for PhD and Research Fellows to spur on industry-research collaboration (especially well received) and builds on the $243m Trailblazer Universities initiative. These actions complement existing support for university research (refer pp 73 of the Action Plan). 

The AEA package is not without comment or critique

The Australian Academy of Science in a measured response notes positives but also sees opportunities in better coordinating the existing national “200 schemes and programs to support research and industry engagement across 13 portfolios” and notes the AEA “does not include incentives for industry to engage with researchers” including “the main existing instrument … the R&D tax incentive”.

InnovationAus sees the 2015 National Innovation and Science Agenda (policy of the Abbott-Turnbull era) and the 2017 Innovation and Science Australia report “Australia 2030: Prosperity through Innovation” as a better “whole-of-government assessment” and “a good starting point in formulating a go-forward strategy for research commercialisation”. Neither of these it seems is referenced in the Action Plan (perhaps a deliberate excision) nor is there (yet) public sight of a 2019 Government-initiated Innovation Metrics Review.

Viewed through a risk lens – AEA launch is uncertain, design uni-centric and impact potentially feeble

The timing of the AEA package sweeps it into the election, with funding details presumably to be affirmed in the pre-election Budget outlining ‘distant’ phasing of expenditure (reports of Senate estimates evidence indicate a ‘decade’, with most expenditure well beyond the four year forward estimates). The rollout plan (refer summary pp 108 of Action Plan) foreshadows passing relevant AEA establishment legislation and making key appointments in the “first half of 2022”. This seems unrealistic given the near end of the current parliament. 

There are also reported different policy views on manufacturing and the R&D Tax incentive held by the opposition, so it’s uncertain which parts, or any, of the AEA package will gain bipartisan support. This all helps flush out future opposition policy. In summary then, the immediate launch of the AEA package is uncertain. 

Second, government is proposing to do something new – good in itself – but revealing. It has not for example decided to majorly remodel and expand the 30-year success story of the CRC Program, despite its many positive reviews, successes and favourable regard internationally. In doing something new (again) the risk is that government is only making worse the existing poor program coordination (refer above Australian Academy of Science). A better design would include complementary incentives for industry. 

How is this doable? The expert advice within the 2016 Review of the R&D Tax Incentive included creating an R&D Tax incentive premium to stimulate university/industry R&D collaboration. Ignoring this, the AEA marks out government/treasury dislike of fiscally ‘open ended’ legislated ‘entitlement’ tax incentive schemes. It prefers a legislated-budgeted outlay program managed by a government agency. All this has to satisfy future scrutiny of parliament, estimates and the Australia National Audit Office. Much will depend of the practical detail in implementing the AEA package: e.g. just how onerous the program design is for applicants and terms of down-stream investment by industry/investment capital. (Eg, might AEA funding for more mature projects be flipped into ‘refundable-loans’, or even ‘new Co equity’?)

So if AEA turns out to be all too complicated for private entities to be part of (as co-investors), each will just do as they do now by independently accessing (if eligible) the R&D Tax Incentive, by far the major support program for business R&D. Instead of implementing the six recommendations of the 2016 Review of the R&D Tax Incentive, that provided both targeted incentives for industry to engage with universities as well as smart-crafted fiscal safeguards, government did zip. 

Had it done so, government would now be reviewing any improvements to its implementation based on five years of hard evidence. Instead, following long inaction, government launches a ‘boost and twist’ impacting universities research funding within three months of an election, a part solution to blatant long standing problem. To be clear, the ‘boost’ in funding is welcome, especially in industry-linked PhDs and fellowships; but the ‘twist’ is far less welcome.

This sets up the third risk. The AEA seeks to incentivise universities by: “Rebalance (of) the focus of existing research programs” to change research culture and to “Adjust $2 billion in existing university research funding to better incentivise commercialisation; Encourage universities to align researcher remuneration and promotion to research commercialisation outcomes; Support greater collaboration between businesses and universities and greater uptake of world-class Australian research and; Develop a new IP framework for universities (to) include standardised terms” (refer pp 66 of Action Plan). 

University Research DVCs are likely still way short on details, like the timeframe for this $2b ‘adjustment’ and how it’s to be ‘encouraged’ (e.g. government wanting influence on conditions of research staff remuneration). Initial changes look to start with a quota of 70% on ARC Linkage Project grants towards National Manufacturing Priority areas; tinkering with leverage arrangements of university research ‘block grants’ and the ARC’s adherence to its recent ministerial “Letter of Expectations” covering funding and governance.  

So before taking this critique further, a diversion in narrative is needed to illustrate an important point.

Evolution of the ‘science and technology’ underpinning ‘COVID-tech-tools’

Politicians and citizens have just had a crash course on new acronyms into everyday parlance e.g. “PCR”, “rapid genomic sequencing”, “m-RNA vaccines”, and “RAT” are prominent. It’s worth looking at how these ‘COVID-tech-tools’ came about – in very simplified terms. 

PCR is the ‘polymerase chain reaction’, a way of exponentially copying unique target fragments of DNA/RNA (e.g. used in DNA ‘fingerprinting’ and other ubiquitous examples). The critical success factors to PCR included isolation of a thermally stable enzyme (polymerase) in microbes surviving in hot thermal springs (in 1969), extensive basic research in synthetic nucleotide biochemistry and DNA replication and (in 1985) the ‘invention’ of PCR by smart integration of this basic research. Rapid nanopore sequencing has its origins in basic research in protein channels incorporated into the membrane of liposomes, allowing passage and rapid measuring of individual nucleotides within a strand sequence. It took about 20 years from concept to first sequencing. 

The tangled history of m-RNA vaccines is chock full of exquisite discoveries in molecular immunology, RNA translation, modified nucleotides and charged lipo-nanoparticles. With epic failures and competing/collaborating biomedical teams working across mostly the Americas and Europe, it took near 40 years of research to ultimately coalesce this knowledge to fulfil the promise of m-RNA vaccines. Rapid Antigen Tests for COVID have a deep 50-year underpinning of biomolecular research in broad antigen/antibody interactions that when engineered in lateral flow assay architectures, these precisely designed molecular interactions provide the key to an array of different rapid diagnostic tests.

So what are the learnings from these examples?

First – researchers involved in these examples initially never set out to ‘invent’ or ‘develop’ or ‘apply’ anything. Their quest was that of ‘knowledge for knowledge's sake’, of ‘how nature works’. There was no predicting what if any applications may be founded (eventually) out of such discoveries, nor how discoveries from different fields may ultimately be integrated. This makes ‘industry advisors’ as part of ARC College of Experts in assessing research merit, especially discovery, of dubious and distorting value.

Second – the COVID-beating ‘tech tools’ have their wellspring in decades of academic research across multiple scientific and engineering disciplines, with generations of researchers all building on knowledge of how and why nature works. It works by researchers competing/collaborating across multiple institutions and spanning many advanced economy nations. As is more typical of the biosciences, it’s not an overnight thing – it takes a long time from molecular discovery to engineered product.

So yes; the AEA’s arguments of funding ‘national interest’ and ‘research priorities’ has some merit; but criticising excessive ‘fragmentation’ of academic fields of research as an inherent weakness (pp 46 of Action Plan) is a flawed premise for change. The nub is that, in making inter country comparisons, best performing countries have a high percentage of GDP spent on both basic and applied R&D, which they effectively connect, but they don’t trade off one for the other. And Australian industry gets this clearly: “We must not let our basic research funding be supplanted by a renewed focus on commercialisation, but where additional (author emphasis) resources are available for applied research: the more the better” (BCA pp35 Action Plan).

Third – for the most part (there will be exceptions) the lesson is that Australia is of size and resource to only ever be a ‘bit player’ in ‘discovery research’. It is essential then to the ‘national interest’, even more than nominating defined ‘industry-applied priorities’ that we place very high premium on effective international collaboration with ‘research best players’ in Asia, the Americas and Europe. We need to be part of leading-edge global teams that build trust and give us a chance of integrating ‘our discoveries’ into complementary invented or applied technologies, including in multinational entities. And critical to this is international research students and Post-Docs etc. that have abiding connection to Australia. Any deliberate or implied national decline in ‘basic research’ investment sends the wrong messages to such researchers internationally.

‘Commercialisation’ is a much valued bonus – but basic research has its own pay back

Fourth – ‘Discovery research’ and pursuit of ‘knowledge for knowledge's sake’ has, in and of itself, an under-recognised overall economic benefit. Albeit difficult to measure, this is because of the value embedded in our labour force: in trained researchers, scientists, engineers and humanities graduates. The likelihood is that many of the nation’s health, science and bio-statistical leaders who provided professional advice during the pandemic had themselves in their early careers participated in ‘basic’ research; and yes their expertise, analyses and decision-making were all the better for such experience. 

Fifth – ‘Basic research’ sustains the nation as ‘fast followers’, staying close to the leading edge of global scientific knowledge and discovery. This resonates into the quality of our faculty and university graduates. Excellence in basic research directly connects with early adoption and local ‘spill over’ adaptation of any ‘new to world’ knowledge, technologies and practices. The productivity uplift from this is likely greater than the rarer additional handfuls of ‘new to world technologies’ that tick all the boxes in the ‘fully discovered or invented and all made in Australia’ scenario (name Cochlear-like examples over the last 30 years?). 

This is not to disagree with the central premise of the Action Plan, that Australia may indeed get more direct ‘commercial return and economic benefit’ by better exploiting its basic research. But let’s not overhype it and over promise. The Action Plan does not indicate if government has a credible national stocktake confirming loads of commercially-convertible IP in Australian universities – and it just needs money.

What is the hard evidence to explain the indicative project numbers in the AEA investment ‘funnel’ (refer pp 58 Action Plan), and what hard data justifies additional government outlay and the enforced ‘rebalancing’ of $2bn research funds? Or is it all future promise? If and when success stories do emerge from AEA, valuable as they may be, their ‘economic/new-jobs’ impact will likely be modest. Those who posit there are loads of projects for easy picking that actually ‘accelerate the economy’ discredit the current efforts of Australia’s quality research intensive universities and medical institutions. These entities are not that revenue indolent or commercially clueless to have left barrow loads of low hanging fruit wasting in the research garden

And considering commercial nous, there is no ‘new IP’ in issuing universities mandated templated ‘IP-Contract Toolkits’. This ‘idea’ is a generation of bureaucrats old and won’t change real world case-specific commercial negotiations and contracting to which Australian law and its codified IP principles apply. 

Lastly, ask which parties have made the effort to increase their research investment? Over the last 20 years Australian universities have steadily increased their research investment, in part from ‘own source revenue’ generated from international student income (R&D expenditure $2.8bn in 2000 up to $12.2bn in 2018, ~9% p.a. growth) (refer pp 12 Action Plan). By comparison business investment in R&D remains largest in total terms ($18.2m in 2020) but has stalled and has long been steadily falling as a percentage of GDP.   

The reality is Australia has had a long-term policy failure to holistically address productivity

The COVID pandemic has revealed how badly flat-footed Australia has been in policies to address its long term productivity performance  The famed long run of GDP growth has been majorly driven by raw commodities exports and deliberate population increase via skilled migration with its many positive economic multipliers and also social/infrastructure consequences. Far less has been driven by labour or multifactorial productivity gains. And it clearly needs to over the next 40 years (pp 20 Action Plan). Over these years, our school students will graduate into a relatively shrinking (to total population) labour force. The present major underperformance by Australian students in reading, maths and science relative to other nations (refer 2019 Program for International Student Assessment (PISA)) just adds to this productivity challenge. 

The harsh retrospective view is that the negative trends of many key metrics of Australia’s relative performance in R&D and innovation is arguably a longstanding combination of multiple governments’ policy neglect, change of (multiple) policies and periodic screwing down on access and eligibility. The highlighted programs of our international competitors (pp 37 Action Plan) only illustrate their more prompt and concerted policy actions. 

The national Treasurer has just commissioned the Productivity Commission undertake a further review of national productivity, a report which might include which parts of the ‘national dial’ responded to its “Shifting the Dial” productivity review of five years ago. Like research, it’s all in the ‘translation and implementation’!

So what’s the future and conclusion?

The 40 year projections in the 2021 Intergenerational Report show no meaningful increase in education outlays.  Higher funding priorities of health, ageing, disability, defence – combined with recovery from the massive COVID-driven Government net debt – means there is little future fiscal headroom to advance public funding of education/research/skills/innovation initiatives much beyond present levels.  

An effective national R&D/innovation ‘eco-system’ needs a minimum necessary of effective and simple programs, end-to-end coordination and integration, and a ‘long haul’ mindset in predictable policy. Basic research has its own economic return, which if effectively connected to industry gives valuable boost when it stimulates new technology product/service innovations. It’s a global game. If a country goes down a path that devalues knowledge-for-knowledge's sake, it’s a road at its end to dropping out of the premier league.

The more immediate risk is that in a constrained funding environment, any policy to ‘rebalance/adjust’ research funding is underplaying a more ideological ‘repurpose’. Universities have measurably increased expenditure on research. By comparison it is industry that is the laggard, at least as measured by business R&D expenditure and in research pull though (with exceptions). Failure to amend the R&D Tax Incentive as proposed five years ago was a lost policy opportunity (reiterated in Cooperative Research Australia’s most recent pre-Budget Submission). 

It’s a real positive government is now actively seeking to solve a long-standing problem; the deeper engagement, collaboration and co-investment between university researchers and high tech-industry. But the proposed Action Plan presents real risks that this ‘accelerator’ will deliver more ‘talk’ than ‘torque’.

Dr Craig Fowler is an analyst and observer of national policies impacting tertiary education, science and innovation after decades of experience in private, public and university sectors.

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