The Future of Australian Innovation is at Risk and Not Enough People Are Talking About It

Why Australian Innovation Matters to All of Us

Australia is at a turning point. For decades, we have taken pride in being an inventive nation, responsible for game changing breakthroughs like WiFi and the black box flight recorder. But that reputation is slipping away, and surprisingly few people seem to notice.

The figures are worrying. Investment in research and development has been falling for more than ten years. While countries like South Korea, Israel and Germany are pouring money into future technologies, Australia's spending on R&D has dropped from 2.2 percent of GDP in 2008 to just 1.68 percent in 2021 and 2022.

You might wonder why this matters. Whether you work in technology, healthcare, agriculture or any other field, the impact of this decline is real and affects all of us.

A Worrying Drop in R&D Investment

When you take a closer look at the data, the trend becomes even more concerning.

Australian businesses, which once led the way in research, are pulling back. A decade ago, business investment in R&D made up 1.28 percent of GDP. Today, it has dropped to just 0.88 percent. Mining companies, which previously accounted for a quarter of all R&D spending, have significantly reduced their investment. Other industries have not stepped in to make up the difference.

Government support has also fallen to record lows. Public funding for innovation now sits at just 0.49 percent of GDP, the lowest level recorded since 1978. Even when you include tax incentives for R&D, total government support has barely changed.

Universities are left carrying much of the burden. Research spending in higher education has risen to 0.6 percent of GDP, but universities cannot drive national innovation alone, especially without strong government backing or industry collaboration.

Losing Ground to the Rest of the World

While Australia has been cutting back, other countries have been investing heavily in the future.

On average, OECD nations now spend 2.7 percent of their GDP on R&D, which is a full percentage point higher than Australia. Countries leading the way in innovation, like Israel and South Korea, are investing between four and five percent. The United States, Germany and Japan all exceed three percent.

As a result, Australia has slipped from twelfth to twenty second place in global R&D rankings. Private sector investment in research is also lagging, sitting at just 0.9 percent of GDP. That is nearly half the OECD average, showing that Australian businesses are not investing in innovation at the level needed to remain competitive.

Why This Should Concern All of Us

Falling behind in research and development has real consequences, not just for scientists and startups, but for the entire economy.

Without serious investment, we risk missing out on the next wave of technological breakthroughs. Australia is already struggling to keep pace in artificial intelligence, robotics and clean energy, ranking only twelfth in the world for AI patent filings.

Startups are finding it harder to grow. Deep technology startups now make up one fifth of Australia's startup ecosystem, but only seventeen percent manage to secure venture capital. In stronger markets, that figure is closer to thirty percent. Large Australian companies rarely collaborate with local startups, forcing many entrepreneurs to look overseas for funding and partnerships.

Future jobs and economic prosperity are also at stake. Research from Universities Australia suggests that increasing investment in R&D by just one percent could add twenty four billion dollars to the economy over the next ten years. High tech industries create skilled, well paying jobs, yet Australia continues to struggle in building these sectors. Our economy remains less complex than that of many of our global peers, making it harder to compete in advanced industries.

How We Can Fix This

The good news is that Australia still has time to turn things around. Here is what needs to change.

We need clear national targets. Australia should commit to increasing R&D investment to three percent of GDP by 2035, supported by a long term plan with clear milestones.

Government funding must be restored. Public investment in research should return to at least 0.6 percent of GDP. This should include more funding for CSIRO, medical research and clean energy projects. The National Reconstruction Fund should prioritise industries that rely heavily on R&D.

Businesses need better incentives to invest. The R&D Tax Incentive should be improved to encourage companies to fund original research. Direct grants could support industries like artificial intelligence, quantum computing and sustainable technology. Government co-funding programs would also help businesses take on more ambitious research projects.

The gap between research and industry needs to be closed. Australia ranks last in the OECD when it comes to collaboration between universities and businesses. Stronger incentives are needed to encourage corporations to work with universities and startups. Innovation hubs could also help bring researchers, businesses and government agencies together to create new ideas and products.

Startups need better support. More venture capital and commercialisation grants would help deep tech startups grow. A government program where agencies act as early adopters of Australian innovations could make a huge difference. Encouraging corporate venture funding would also help keep intellectual property in Australia, rather than losing it to overseas buyers.

We must also invest in people. STEM education needs to be strengthened, with more scholarships available for R&D careers. Stronger incentives could help retain top researchers in Australia, while streamlining startup visas would attract global entrepreneurs to work in research intensive industries.

The Time to Act is Now

Australia's declining investment in R&D is a crisis in slow motion. Without urgent policy changes, we risk falling further behind, relying on technology developed elsewhere instead of creating it ourselves.

But it does not have to be this way. We have world class research institutions, a highly skilled workforce and an emerging startup ecosystem. By taking decisive action now, through better funding, stronger incentives and closer industry collaboration, we can position Australia as a leader in innovation once again.

The decisions we make today will shape our future. Will we invest in ideas, technology and progress, or will we watch as the rest of the world moves ahead without us?

Sources

• Australian Government - Australian Research Council (ARC). (2025). DP25 Selection Report for funding commencing in 2025. Retrieved from ARC.gov.au.
• Australian Government - Department of the Treasury. (n.d.). Budget allocations for research and development. Retrieved from Treasury.gov.au.
• Australian Bureau of Statistics (ABS). (n.d.). Research and development expenditure and innovation in Australia. Retrieved from ABS.gov.au.
• Senate Economics References Committee. (n.d.). Australia’s Innovation Future: Report on the nation’s innovation system and recommendations for improvement. Retrieved from APH.gov.au.

Group of Eight Universities. (2023). Australia's R&D Intensity: A Decadal Roadmap to 3% of GDP. Retrieved from Go8.edu.au.