Australian budget reveals murky future for research and innovation

SOURCE: Peter Parks/AFP
Will Australia's 2019/2020 only stall the progress of new innovation?

By U2B Staff 

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The absence of new funding allocations for Australian research and innovation in the country’s recent 2019/2020 budget reveal has sparked concerns over the government’s lack of strategic vision to grow the nation’s economy.

Peeling back layers of political speak from a budget primed for an election to be called in days, Australia’s academic and startup communities said funding boosts for women in STEM and the country’s space sector were eclipsed by continued cuts to key research agencies and programmes. 

In the spending plan, the government allocated AU$3.4 million in new funding to support women in STEM, AU$1.8 million of which would be injected into the existing Science in Australia Gender Equity (SAGE) initiative rolled out by the Turnbull government in 2016.

The budget also proposed a AU$25 million allocation for coastal, environment and climate research; AU$56 million for nuclear medicine and waste management; AU$5 million for a dark matter particle research facility; AU$15 million for expanded outreach and education activities through Questacon; and AU$19.5 million over four years to establish a Space Infrastructure Fund.

These investments are modest at best, and failed to impress Australia’s funds-starved scientific community. What garnered the most attention, especially from the country’s research-intensive universities, was the lack of new money for research grants.

Instead, the conservative leadership proposed abolishing the AU$3.9 billion Education Investment Fund (EIF) and funneling its funds into a new Emergency Response Fund. This is following a failed attempt to repurpose the EIF to partially fund the National Disability Insurance Scheme (NDIS), which did not gain parliament’s approval.

In their immediate response, university and business leaders called the spending plan a “missed opportunity” and asked – does the government even have an innovation agenda in place at all? Adding salt to wound was the Morrison leadership’s apparent elation at trumpeting Australia’s first budget surplus – amounting to AU$7.1 billion – in over a decade, which they said was misplaced.

“Whatever happened to Australia becoming the innovation nation?” asked FinTech Australia general manager Rebecca Schot-Guppy.

No clarity on R&D tax breaks

Prior to the budget announcement, local startups had urged for clarity on the future of the country’s research and development tax incentive scheme, which allows businesses to claim support for software activities.

Following numerous cases of overclaim by companies, the scheme had been put under review to tighten the definition of “R&D”, the outcome of which remains unknown. Startups say, however, without the incentive, progress in Australia’s startup and tech innovation ecosystem would suffer and local players would struggle behind their global competitors.

But the Morrison government failed to clear this up, unveiling a spending plan that instead suggested a AU$1.35 billion cut over the budget forward estimates. This is in addition to the AU$2.4 billion cut last year due to structural changes to the scheme’s operations.

Fintech Australia’s former chairman Stuart Stoyan expressed disappointment at the lack of clarity surrounding the incentive, which he insisted was necessary to spur further growth in startup and fintech industries.

“This is critical for the future of innovation in Australia,” he pointed out. Add the multibillion-dollar cuts over the budget forward estimates to that and it begs the question whether the Morrison government had any kind of long-term innovation agenda at all, he said.

“It seems as if the innovation agenda of former prime minister (Malcolm) Turnbull has been long forgotten. If data is the new oil then we want to see a commensurate investment.”

Scott Morrison
The Morrison government’s proposed 2019/2020 budget earned brickbats from Australia’s research and startup communities.

Echoing the concern, Tim Moylan, co-founder of video startup Shootsta said: “it’s budgets like this one that force us to question whether we should tell other founders to start a business here.”

The R&D tax break, added co-founder and co-chief executive of Assembly Payments Victor Zheng, had given Australia an “incredible” leg up in the global race to innovated.

“How are we supposed to compete with Silicon Valley and China now?” he said.

Black day for university research

Australia’s universities, meanwhile, were outraged by the government’s failure to address “economy-damaging” cuts inflicted on university funding over the past 18 months.

In that period, in addition to cuts of AU$2.1 billion to funding for student places, the government had also slashed AU$328 from university research. But with the budget enjoying a surplus for the first time in a decade, there was no need to maintain these measures, Universities Australia Chief Executive Catriona Jackson said.

She also questioned the proposal to repurpose the EIF to fund natural disaster recovery, saying: “There is no need to raid Australia’s last remaining fund for building education and research infrastructure.”

“As an advanced nation, we should be able to invest in both research infrastructure that helps us understand and address emergencies, as well as an emergency response fund. Surely with a AU$7.1 billion surplus, this is not an either/or proposition,” she added in a statement.

Jackson said the EIF had been gathering dust since the government froze payments, with the last payout in 2013, which meant six years of lost investment opportunities.

Furthermore, she pointed out that research supported by the EIF infrastructure had included work on climate change, natural disasters and human behaviour, all of which were vital to successful emergency responses.

Adding to the argument, the Group of Eight (Go8) said although research by its universities return nearly AU$10 for every AU$1 of taxpayer investment, the government was always starving it of funds. Of the AU$6.4 billion of research the Go8 conducted in 2016, the government contributed just AU$2 billion in direct research funding.

“Universities have proven they can be relied upon. Our 27 years of economic growth in Australia has been underpinned by one of the world’s best higher education and research systems. Yet, despite this, the government has failed to back the sector in a year of budget surplus,” Go8 chief executive Vicki Thomson said.

“Given recent experience, it seems that in budget terms the Higher Education research sector is the first to get cut and the last to see long term, sustainable investment. This reflects an attitude of dangerous complacency towards a sector that is a key driver of Australia’s economy.”