A Proposed National Innovation Council: Is Australia Chasing a Mirage?

Rajesh Gopalakrishnan Nair*, 27 March 2026

The Strategic Examination of R&D, in its recently published final report, Ambitious Australia, recommends establishing a National Innovation Council (NIC). Drafted through an overwhelmingly participatory process, the report stands out for its strong emphasis on innovation. Even a casual reader cannot fail to notice its shift in focus from ‘strengthening Australia’s R&D system’, which was mandated under the ToR, to conceptualising an ‘innovation flywheel’. This is an unusually bold yet commendable feat.         

The idea of NIC is not new to Australia. Perhaps, Australia pioneered it (discussed later), yet the council remains a mirage–a recurring idea never fully materialised. However, the massive public consultation that preceded the report offers new hope, as it reflects the community’s appetite for change and might provide the political persuasiveness necessary for implementation.

Ambitious Australia exposes systemic flaws: fragmentation and lack of coordination; strategic and governance deficiencies; investment and capital gaps; structural and economic limitations; cultural and workforce barriers; and an absence of a clear national innovation narrative. These weaknesses stem from a policy framework founded on an erroneous perspective of ‘innovation’ as spontaneously arising from science and/or research.

Ambitious Australia envisages the NIC as a single, independent, strategic governance mechanism of the highest order, functioning as a strategic coordinator, a central overseer of RD&I funding, and a governance framework to provide the oversight and coherence needed to correct a broken and atomised system.  

While wholeheartedly welcoming the proposal, this Innovation Insight argues that building an institutional architecture conducive to innovation policy is far more complex than introducing a policy instrument or tweaking existing ones. It demands a deeper, far more disruptive process that requires a shift in the policy paradigm itself. This process would have to navigate at least two challenges: Dealing with the traditional gatekeepers of the system and a political culture that compromises on its own policy rhetoric.

The Insight begins by situating the NIC proposal within Australia’s policy context. It then examines past failed attempts and compromised policy rhetorics, before concluding with an argument for a deeper shift in the policy paradigm. Such a shift is impossible without overcoming the ‘confused co-existence’ of rival and incompatible ideological positions that dictate policy outcomes.

1. Why A NIC?

Since the emergence of Innovation Systems as a policy framework in the early 1990s, several countries created NICs chaired by their heads of state. NICs perform two important functions.

• It politically distinguishes innovation policy from research/science policy. Most national policy frameworks still retain the outdated science-push model that mixes up research with innovation and treats innovation policy as an appendix to research policy. NIC might help shape a holistic approach to innovation and set a broad policy direction by serving as an exclusive forum for discussing innovation policy (Edquist 2017).

• It serves as a strategic coordination mechanism. Innovation policy cuts across several sectoral policies (health, education, agriculture, etc.).  For example, Australia’s innovation policy is spread across 13 separate portfolios of government, and 150 separate budget line items (Green 2024). This creates ‘policy fragmentation’ that is inefficiencies resulting from both the disconnect and the overlapping of efforts. NIC helps coordinate and integrate innovation policy horizontally across ministerial silos by exercising its political power.

Australia has no such mechanism to coordinate innovation policy. In contrast, research and science policy has many:

• The National Science and Technology Council (NSTC), chaired by the Prime Minister, sets the strategic direction for S&T policy.

• Australia’s Chief Scientist provides evidence-based advice on whole-of-government S&T priorities.

• The National Research Infrastructure (NRI) and its Advisory Group roadmaps provide for the provision of cutting-edge research infrastructure.

• The Australian Research Council (ARC) funds basic research (except medical research) through the national Competitive Grants Program.

• The National Health and Medical Research Council (NHMRC) funds medical research.

Some of these bodies have innovation as an ‘additional agenda’, but this only exacerbates policy fragmentation.  There were at least two previous proposals to establish an apex coordination mechanism for innovation policy.

2. Previous proposals for NIC

2.1. ‘Venturous Australia’

In 2008, the Rudd government engaged Terry Cutler for a major review into Australia’s NIS. In his report ‘Venturous Australia’, Cutler proposed a new ‘National Innovation Council (NIC)’ to replace the Prime Minister's Science, Engineering and Innovation Council (PMSEIC) —an advisory body chaired by the Chief Scientist.

The NIC was to be chaired by the Prime Minister, and function as a ‘central brain’ to achieve coherence, flexibility and responsiveness necessary for innovation policy. Its mandate was to take a ‘helicopter view’ of the innovation system and provide strategic leadership to the national innovation agenda. Cutler’s recommendation rested on the finding that the Australian innovation system lacked policy coherence and was subject to horizontal and vertical fragmentation of innovation resources.

The package for reviving innovation policy included three other instruments: A high-level office for innovation assessment to support the council; a National Innovation Research Centre (NIRC) for advancement of knowledge on innovation; and a framework of principles of innovation intervention to be adopted by state and central governments.

This was a remarkable proposal, far ahead of its time. Until then, no country had a national council dedicated to innovation policy. The Finnish Research Innovation Council (RIC) was established only in 2009. Nevertheless, the proposal was sidelined. Instead, the 2009 policy paper Powering Ideas announced the decision to reinvigorate’ PMSEIC—originally created as the principal government advisory council for science, technology and engineering and subsequently renamed in 1997 to include innovation.

The PMSEIC explicitly drove a science-push linear innovation model (Marsh and Edwards 2009). Rejecting the Cutler proposal has been a missed opportunity for Australia to become a pioneer and world leader in innovation policy coordination. PMSEIC was disbanded in 2015, replaced by the Commonwealth Science Council (CSC), which then transitioned to the current National Science and Technology Council (NSTC) in 2018 after removing the innovation component from its portfolio.  

2.2. ‘Innovation Future’

In 2015, the Senate established an inquiry into the state of innovation. A report commission by the committee Australia’s Innovation Future’ by Roy Green and John H Howard recommended setting up a National Innovation Council (NIC), and four strategic mechanisms to support it: Innovate AUS (to build enterprise capability), National Science, Research and Innovation Foundation (as an investor in R&I): a Local Innovation Initiative Investment Fund: and an Integrated Tertiary Education System (Green, and Howard, 2015).

Green and Howard, in line with Cutler, modelled NIC on the innovation councils of Sweden, Finland, Ireland, Singapore and the U.S. Again, the council was to be chaired by the PM and was perceived as a precursor to a comprehensive innovation policy. Conceptualised as the ‘peak organisation’ for STI policy, it was to undertake a regular knowledge foresight exercise, set national innovation and industry development priorities and promote active communication, cooperation and partnership across sectors and agencies. It was to replace the Science Council (SC) installed the previous year, reconstituting the Australian Science, Technology and Engineering Council established in 1977. Needless to say, the proposal was discarded.

The public debate it raised was subsumed by the launch of a new National Innovation & Science Agenda (NISA-2015). Ironically, NISA itself was short-lived.  Despite being heralded as a ‘watershed moment in the national innovation history’ and a deliberate attempt to shift the national innovation narrative by placing innovation, science and entrepreneurship at the heart of national policy, NISA was truncated in 2018 by the Morrison government (Howard 2025). 

2.3. A confused coexistence

Currently, the pinnacle advisory body on science and technology is the NSTC. OECD’s STIP Compass lists it as Australia’s highest science, technology and innovation policy coordination instrument. Table 1 compares the constitutions of NSTC and the NIC as proposed in the 2015 Senate Enquiry. This table explains why NSTC is ineffectual as an innovation policy coordination mechanism, what difference NIC would have made to Australia’s innovation policy coordination, and why the gatekeepers of the science-push ideology would not allow NIC to replace NSTC.

Table-1: Comparison of the membership of NSTC and NIC (proposed)

NSTC (Present)

NIC (as proposed in ‘Australia’s Innovation Future’, 2015)

–Prime Minister (Chair) –Minister for Science (Deputy Chair), –Chief Scientist (Executive Officer), ex-officio, –Chief Executive of the CSIRO, ex-officio, –6-8 expert scientific members.

–Prime Minister (Chair) –Ministers for Industry, Innovation & Science, Education, Health, Environment, Trade, and Agriculture –Chief Scientist –Chief Defence Scientist –Chief Economist –CEOs of Research funding councils – NHMRC, Australian Research (and Innovation) Council and the larger RDCs (GRDC, MLA and HIA) –CEO of CSIRO –University Vice-Chancellors –Business CEOs from key industry sectors –Industry Growth Centre leaders

The two aborted proposals were guided by profound understanding of the issues that debilitate innovation, and reflected the ground reality through comprehensive consultation processes. The governments that commissioned the Cutler review (2008), and supported the Senate inquiry of 2015 were open to the systems thinking narrative. But the policy processes that followed, being deeply influenced by the market failure narrative, did not allow it.

This exposes the inherent characteristic of Australia’s industrial innovation policy of being a hybrid, often a contradictory mix of neoclassical and systems approaches.  Table 2 summarises the evolutionary history of such compromises since mid-1980s. This perhaps has led to a state of what Dodgson (2011) refers to as ‘confused co-existence’ of rivalling and incompatible ideological positions dictating policy outcomes. 

3. Compromised policy rhetorics:

Australia’s innovation policy environment is torn between two major policy ideologies—the neoclassical market failure logic on the one hand and the evolutionary innovation systems logic on the other.

Dodgson et al. (2011) argued that attempts to combine these incompatible frameworks have led Australia’s innovation policy to a state of confusion. More recently, Lewis and Mikolajczak (2023) observed that the confusion prevails, as it attempts to reconcile two incompatible and politically divergent definitions of innovation—as ‘business and technology’ by Coalition governments and ‘culture’ by Labor governments. These two observations are complementary, and they unveil conceptual and discursive issues impacting innovation as an inherently political phenomenon[1].

3.1. The politics of innovation

Coalition governments lean towards the neoclassical ‘science-push’ perspective that innovation is an outcome of science, and research and its utility is translating knowledge for commercial purposes. In the neoclassical assumption knowledge is a homogeneous commodity that can be augmented incrementally and diffused spontaneously.  While certain characteristics of knowledge (cumulative and reproducible at low cost) are helpful in commercial exploitation others (asymmetries of knowing, uncertainty, intangibility and not fully excludable) are not.

Hence private firms cannot monopolise the benefits of their innovation efforts, as competing firms and the society receive ‘spill-over benefits’. This disincentivises private R&D leading to market failure. It is based on this ‘market-failure theory’ that neoclassical economics justify government support for R&D. Tax incentives, subsidies, funding of research etc. are instruments to correct market failure. Neoclassical economics do not support interventionist industrial policy or systemic innovation policy.

In contrast Labor governments are inclined to adopt a ‘cultural’ perspective in which innovation is a ‘systemic capability’ built into organisations and not merely science, technology or novelty. In this approach knowledge and innovation are public goods. Owing to its lumpy nature and its diffusion being a complex and difficult process, managing knowledge is not as straight forward as the neoclassical theory assumes.

The systems approach also recognises the tacit component of knowledge, often arising from the factory floor, as the most useful. Innovation progresses through two-way information flow through feedback loops. Market failure and risk-taking are not feared of but treated as part of the game. The main threat here is ‘system failure’–in other words, inadequate promotion of innovation and business model experimentation.

The history of Australia’s innovation system has been a tussle between these two perspectives. However, boundaries of this distinction are blurred in real policy and politics where compromise is often the norm. Table-2 illustrates how Australian governments have compromised on their rhetorics and mixed up the two approaches, leading to policy confusion and coordination issues. Non-materialisation of the NIC has much to do with such compromises.

3.2 An ongoing Tussle

The 2014 report of the Office of the Chief Economist of the Department of Industry, titled ‘Australian Innovation System Report’, illustrates this confused coexistence. The report produced under one of the most ‘innovation-hostile’ governments quoted Stuart Elliot, the founder of Planet Innovation–the most innovative Australian company in 2013:

“I get very frustrated by the assumption that innovation has to start with research. I don’t want to say there’s not a place for research. There absolutely is. But it doesn’t have to start there at all. Secondly, it’s a small piece. Research is a small piece of the pie. But in Australia in terms of funding and focus it’s not. Research should be between 25% and 50% of the focus, money and brain power.” (Department of Industry 2014)       

The question remains, why amid this confused co-existence, science/research-push model alone wins? While there is no direct answer, the case of the ‘Innovation Summit’ under the 2000 Coalition government sheds some light on this rather rhetorical question.

4. The stolen innovation summit

John W Howard’s 1998 election manifesto had promised to rejuvenate innovation policy. The National Innovation Summit held in February 2000 was part of this promise. But the summit moved away from its innovation policy focus and its original ‘application-pull, system-failure’ narrative was captured by the ‘science-push, market-failure’ narrative. Marsh and Edwards (2008 & 2009) have made an erudite analysis of how this opportunity for consolidating an ‘innovation systems thinking’ was lost.     

The summit emerged in the backdrop of slashing of R&D tax concessions under Howard government’s austerity measures. This alarmed the business community. The Business Council of Australia (BCA) pressed the government to re-assess innovation strategy for which the summit provided an opportunity. Apart from BCA, the key stakeholders included the industry department, large corporations, industry associations, research organisations, and universities. The implementation of the summit was controlled by the PMSEIC dominated by members from the science/research community.      

The senior officials holding organisational responsibilities, mostly neoclassical economists, played gatekeeper roles and defined the policy outcomes of the summit. The thematic highlight of the summit was ‘science-push’. Most delegates came from R&D institutions. The research community dominated the Implementation Group (ISIG) responsible for consolidating the summit findings. They made sure that the final report advocated continuity of existing policy and emphasise R&D spending as the basis of innovation. The report demanded an increase in business investment in R&D.

BCA’s interest was tax concessions. The Treasury and PMO were opposed to any economic intervention other than on the grounds of market failure. The Chief Scientist’s report exclusively supported a publicly funded research system that would generate knowledge as a necessary precursor to innovation. The PMSEIC, dominated by scientists and researchers did not raise any argument favouring innovation. Thus, the innovation system approach was marginalised, projecting a neoclassical market failure outlook of innovation policy. A key document ‘Backing Australia’s Ability’ was released in 2001 which expressed Government’s determination to drive innovation through a 3 billion dollars investment over five years. However, the final allocations disproportionately favoured scientific research over innovation. 

As the education department was in charge of research, the industry department was relegated to the second position in deciding the innovation strategy. Its role was reduced to matters of venture capital and firm level programs. Thus, an Innovation Systems based, demand-pull model of innovation was delayed in Australia. The impact of the Innovation Summit locked Asutralia’s innovation policy in a science push model for several decades.

The case of the innovation summit reveals two chronic deficiencies in the Australian policy scenario—absence of adequate institutional mechanisms for innovation policy and the lack of political will to build them.

 Table-2 Compromises on announced policy 1983-2022

Prime Minister	Year	Announced policy	Compromises made
Bob Hawke, Paul Keating (Labor)	1983-1986	Reduce protection, modernize industry, market-oriented reform.	–Button plans (1983-96) reduced tariffs and restructured industries but continued ad hoc incentives. Protected local industry alongside interventionism. –Prioritised ‘jobs’ over ‘reforms’ during recession.
1987–1991	Strategic restructuring of industry under ‘Australia Reconstructed’ manifesto.	–The ‘manifesto’ was sidelined. Resorted to macroeconomic solutions under Treasury advice. –CSIRO being asked to generate 30% income from industry—beginning of its corporatisation and loss of dominance in NIS.
1994–1996	Competitiveness and no protection. White paper ‘Working Nation’ for full employment.	–Reverted to macroeconomic policies and microeconomic reform. – ‘Working Nation’ addressed only market failure.
John W Howard (Coalition)	1996–1998	‘Activist industry policy’	–Retained interventionism of Button plans (1983-96) R&D tax concessions cut from 150% to 125%—reviewed, after opposition from business, under ‘Investing for Growth’ statement (1997).
1998–2003	Detailed evaluation of NIS for framing national innovation strategy and strengthening innovation policy.	– ‘Knowledge and Innovation (1999)’, ‘National Innovation Summit (2000)’, ‘The chance to change (2000)’, ‘Unlocking the Future (2001)’, – ‘Backing Australia’s Ability-BAA’ (2001)—175% R&D tax concession re-introduced. Ultimately promoted science/research-push model in a market-failure logic, with limited attention to system failure model.
2003–2007	Return to economic orthodoxy, no strategic industry policy. Strengthen CRCs	–Continued ad hoc industry support & postponed tariff cuts for vulnerable industries (car, textile, footwear). –National Research Flagship programme (2004) reconstructed CSIRO as a corporatist, commercialised research bureaucracy. –Howard Review (2005) found CRCs strong in scientific output but weak in commercialisation.
Kevin Rudd, Julia Gillard (Labor)	2007–2010	Revitalize industry policy, innovation & knowledge intensive industry—in a ‘post-mining boom’ perspective.	–Despite ‘Mortimer review (2008)’ and ‘Cutler Review (2008)’ recommendations and the innovation agenda in the white paper-‘Powering Ideas (2009)’ policy focus remained on R&D tax incentive and an internationally competitive ‘green car’ industry. –Ignored a proposal for National Innovation Council and revived PMSEIC in a science-push approach.
2010-2013	Innovation-led, advance manufacturing and green growth.	–Ignored industry policy. Abandoned ‘the $2,000 Cleaner Car Rebate’, ‘Green Car Innovation Fund’, and Solar and other environmental programmes.
Tony Abbot	2013-2015	Rejection of innovation systems and reintroduction of market-failure approach.	–Industry Innovation and Competitiveness Agenda retained interventionist recommendations and targeted support to some sectors. –CRC program review (2015)—'CRC Projects’ for SME involvement in collab research.
Malcolm Turnbull	2015-2018	Modern innovation economy, systems approach & collaboration.	–Ignored recommendation for a national Innovation Council by Senate inquiry. NSTC prevailed and innovation component subsumed under NISA. –NISA with 24 disparate, fragmented, uncoordinated measures dominated single-firm R&D tax incentives. –Net outcome broadly neoclassical market-failure mode.
Scott Morrison	2018-2022	“Innovation is political poison”	–NISA truncated in 2018, ISA continues oversight but its system thinking curtailed. –R&DTI, CRCs, VC programs, BRII, BTF etc continued, without coordinated national strategy. –No systemic reforms
Sources: Jones (2006), Conley & Acker (2011), George and Tarr (2021)

 5. Conclusion: Boldly ambitious but fated by legacy.

 Though unacknowledged in the report, Ambitious Australia boldly echoes its predecessors. The real test remains whether it can escape their fate. The report outlines an institutional structure that leverages the existing institutional infrastructure of IISA. It envisages consolidation of national innovation efforts into six pillars–each with specific National Strategic Initiatives (NSIs) ensuring vertical integration. These pillars are to be governed by and liaised with the NIC through pillar specific National Strategy Advisory Councils (NSAC).

Unlike previous proposals the NIC will be chaired by an 'eminent Australian', rather than the Prime Minister. The direct reporting line to the PM is a compensation, but absence of a political skin-in-the-game leaves a huge opportunity cost. The report keeps the option open for integrating NSTC (chaired by the PM) with NIC (p.27), thereby elevating Innovation Policy to a whole-of-government priority over and above S&T policy. This bold proposal might self-sabotage, by inadvertently unsettling the traditional gatekeepers of the system, triggering institutional resistance.

The terse evolutionary analysis of this Insight has tried to demonstrate that compromised policy rhetorics of competing political ideologies debilitate Australia’s innovation policy. These compromises help perpetuate the dominant market-failure narrative and have locked innovation policy within an outdated ‘science-push’ policy framework. The neoclassical policy paradigm prevailing across political and electoral cycles has deprived innovation policy of an institutional architecture necessary for its operation. The proposed NIC is just an enabling structural component of this fragmentary institutional architecture.

Installation of an NIC alone will be insufficient for the innovation policy to be fully operational. In the absence of the rest of the institutional architecture the NIC will be a stand-alone, cantilever-like structure. Its stability will be under threat, without the counterweight and support that only the structural integrity of the innovation system could provide.      

This is a systemic issue that cannot be resolved by incremental changes like introducing a policy instrument. To ensure effective and uninhibited performance of innovation policy, the policy paradigm itself requires drastic restructuring. It calls for a disruptive change, a thorough institutional transformation. The traditional gatekeepers of the system must either be replaced, or have their mindset changed through targeted capability building.

Such a paradigm shift could only be achieved through strong political will. Unless this political will is garnered and systemic constraints addressed, effective innovation policy will remain a mirage, rendering instruments like the NIC a mere symbolic gesture.      

Acknowledgement: The author thanks Emeritus Professor Roy Green, OA, and Dr. John H Howard for comments on previous drafts, while accepting responsibility for all the opinions and interpretations. As a non-native English speaker, the author has used AI as a dictionary, thesaurus, and phrasebook, and to annotate texts, subsequently verifying accuracy. All arguments presented are author’s own.

References

Bhattacharya U, Hsu P-H, Tian X, Xu Y. (2017) What Affects Innovation More: Policy or Policy Uncertainty? Journal of Financial and Quantitative Analysis. 2017;52(5):1869-1901. doi:10.1017/S0022109017000540 

Conley Tom & Elizabeth van Acker (2011): Whatever Happened to Industry Policy in Australia?, Australian Journal of Political Science, 46:3, 503-517. http://dx.doi.org/10.1080/10361146.2011.596522

Cutler & Co, (2008). Venturous Australia—Building Strength in Innovation, Melbourne.

Department of Industry (2014) Australian Innovation System Report 2014. URL: https://www.industry.gov.au/publications/australian-innovation-system-report-2014 

Edquist Charles (2019) Towards a holistic innovation policy: Can the Swedish National Innovation Council (NIC) be a role model? Research Policy 48 (2019) 869-879. https://doi.org/10.1016/j.respol.2018.10.008 

Díaz-Díaz, N.L., Lopez-Iturriaga, F.J., Santana-Martín, D.J., (2022). The role of political ties and political uncertainty in corporate innovation. Long. Range Plan. 55 (1), 102111. https://doi.org/10.1016/j.lrp.2021.102111 

George A-J, Tarr J-A. (2021) Addressing Australia's collaboration ‘problem’: Is there a Brave New World of innovation policy post COVID-19? Aust J Publ Admin. 2021; 80: 179–200. https://doi.org/10.1111/1467-8500.12470

Green, R., and Howard, J.H. (2015).  Australia’s Innovation Future: A Report on the Structure and Performance of Australia's National Innovation System. The Senate, Canberra: https://howardpartners.com.au/wp-content/uploads/2023/01/Australias-Innovation-Future.pdf 

Howard (2025) NISA's Venture Capital Legacy: Igniting Australia's Innovation Engine. Acton Institute of Policy Research Blog Dt. Nov 25, 2025. URL:  https://www.actoninstitute.au/post/nisa-s-venture-capital-legacy-igniting-australia-s-innovation-engine 

Jones E (2006) 'The Evolution of Industry Policy under Howard', Australian Review of Public Affairs (online). URL: http://www.australianreview.net/digest/2006/02/jones.html 

Marsh and Edwards (2008) The development of Australia’s innovation strategy: can the public sector system assess new policy frameworks? Australian Business Foundation Occasional paper. URL: https://docslib.org/doc/3657648/op-marsh-and-edwards 

Marsh Ian and Edwards Lindy (2009) Dilemmas of Policy Innovation in the Public Sector: A Case Study of the National Innovation Summit. The Australian Journal of Public Administration, vol. 68, no. 4, pp. 399–413 doi:10.1111/j.1467-8500.2009.00647.x

NSTC ToR (2025) NSTC Terms of Reference web-page:  https://www.chiefscientist.gov.au/2018/11/national-science-and-technology-council-terms-of-reference

SERD (2025) Ambitious Australia: Strategic Examination of R&D Final Report, Strategic Examination of R&D independent expert panel. URL: https://www.industry.gov.au/sites/default/files/2026-03/ambitious-australia-strategic-examination-of-research-and-development-final-report.pdf  

Wang Quan-Jing, Gen-Fu Feng, Yin E. Chen, Jun Wen, Chun-Ping Chang, (2019) The impacts of government ideology on innovation: What are the main implications?, Research Policy, Volume 48, Issue 5, Pages 1232-1247, https://doi.org/10.1016/j.respol.2018.12.009.

[1] Empirical research demonstrates that political connections, political ideology and political uncertainty impact corporate and national innovation performances (Bhattacharya, et al. 2017, Díaz-Díaz et al. 2022). Wang et al. (2019) showed that left wing and right-wing political parties produce differential impact on national performance of technical innovation.  

---

*Rajesh is a civil servant in India and student of Innovation Studies. A keen observer of Australia’s Innovation System, his research interests include research diffusion and innovation policy.