Australia is far beyond other major countries in research & development spending, which is likely to stall our economic recovery, according to think tank the Committee for Sydney.
The Committee is calling on the Federal Government to increase funding on research and development (R&D) to match the OECD average of 2.37% of GDP, up from our current rate of 1.79%.
Total R&D spending as a percentage of GDP has declined in Australia in every year for the past decade. In contrast, countries that lead the world in new technology such as Israel, Germany and South Korea have increased their spending in recent years.
Australia spending on R&D has sunk to 1.79% of GDP, well below the OCED average of 2.37%, and far below Israel (4.94%) and South Korea (4.53%).
Analysis by EY undertaken for the Committee found that increasing funding would deliver $6 Billion in immediate economic stimulus through spending in the R&D sector, combined with ongoing, persistent productivity improvements worth $4 Billion and create 22,000 jobs per year.
While R&D is undertaken primarily by the private sector (53% of spending) and universities (34% of spending), the Federal Government plays a crucial role in paying for some of it. We propose three key actions by the Australian Government over the next 5 years while Australia’s economy transitions post-COVID.
A decline in R&D funding is likely to be exacerbated by the funding challenges faced by many Australian universities. For many years, government funding for research has been cross-subsidised by international student revenue, which provides 29% of all research funding.
Following COVID-19, funding from foreign students has collapsed, and with it, $7.23 Billion of research will likely disappear over the next five years, meaning 4,600 full time researchers may lose their jobs.
CEO of the Committee for Sydney, Gabriel Metcalf said:
“Australia has been a world leader with its health management response and its income replacement response to COVID. But on the other side of the pandemic, the country will be faced with a massive, long-term project of rebuilding the economy. The current settings are not going to be sufficient.”
“In the long run, it is Australia’s ability to develop new products and new services for globally competitive industries that will determine its prosperity. One of the most powerful and direct ways to support that imperative is to invest heavily in research and development.”
“Funding research during a moment of intense economic upheaval will speed up the creation and transition of our economy.”
Notes for Editors
- The Committee for Sydney is an independent think tank and champion for the whole of Sydney, providing thought leadership beyond the electoral cycle. The Committee aims to enhance the economic, social, cultural and environmental conditions that make Sydney a competitive, resilient and liveable global city. The Committee has a diverse membership with over 150 member organisations: including the major corporate sectors driving Sydney’s economy; strategically minded local authorities; key NSW Government departments and agencies; not- for-profit organisations; and leading arts and sporting institutions. Members help develop and deliver priorities, provide expertise and ensure a representative geographical spread across the greater Sydney region.