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Australia’s frontier economy culture threatens opportunity and growth

Updated: Apr 4

November 22, 2022

John Menadue has written two insightful articles on the $530 billion infrastructure scandal. The documented account of waste and misallocation is deeply concerning not only on its own terms but also as the root cause of an even bigger problem in public sector resource allocation. It is a story of a missed opportunity and commitment to grow Australia as an advanced knowledge-based economy.

Australia as a frontier economy

Menadue’s account confirms that Australia is driven by a frontier culture based on abundant natural resources and an avowed need to create the necessary physical infrastructure to open the country to economic development.

World Development Indicators report that Australian expenditure on infrastructure, covering the construction, mining, electricity, gas, and water industries, amounts to 20% of GDP, a characteristic of developing nations. The average for the OECD is around 8%. Trends are shown in Figure 1.

Figure 1: Expenditure on infrastructure as a proportion of GDP (%)

Source, World Bank, World Development Indicators, 2022, drawn from World Bank national accounts data, and OECD National Accounts data files. Based on the International Standard Industrial Classification (ISIC), revision 4.

Whilst relative commitment to infrastructure in advanced economies has been declining, the commitment in Australia has been increasing.

Opportunities lost

This commitment to infrastructure has been occurring at the expense of investment in other priority areas, particularly the new industries that will grow the new economy. These include the new manufacturing, biotechnology, and advanced materials. These are industries driven by advanced technologies and breakthroughs in information and communication technologies, AI, sensing, robotics, and visualisation.

New technologies can potentially disrupt and transform the construction, mining, electricity, gas, and water industries. So far, progress has been slow, particularly in construction.

Thirty years ago, there was an enthusiastic conversation about the knowledge economy and a future determined by the development and application of knowledge generated through investment in science, research, and innovation (SRI).

From 1997 the OECD led the charge with work on National Innovation Systems, which explored the tripartite relationships and interactions between universities and research organisations, industry, and government. A considerable groundswell of interest emerged in academia, research organisations, Parliamentary Committees, innovation policy consultants, and the Department of Industry.

More than 100 reports, papers and ministerial statements followed over the next 25 years advocating greater investment in SRI. Beyond perfunctory responses after the 2000 National Innovation Summit, there has been little long-term Cabinet interest or commitment to SRI Investment.

Investment in public science to spur private sector activity, directly or indirectly, does not have a prominent position in the broader Australian economic development discourse. The Productivity Commission, and other neo-liberal economists in Government, have actively argued against it. Infrastructure investment, with its promise to create jobs, tends to carry the day.

The result has been a falling R&D commitment, stagnant per capita growth, and poor productivity performance. R&D investment currently stands at 1.79% of GDP — well below the OECD average of 2.7%

The recent decline in national SRI investment

In 2021-22, Commonwealth investment in public science amounted to a mere 0.56% of GDP. The proportion has fallen since it peaked at 0.67% in 2011-12. That investment is directed predominantly to Higher Education through the block grant arrangements. The ARC has an important role through its capacity and capability investments (transformation centres, centres of excellence, research fellowships), but the amounts are relatively small with limited time frames (3-4 years).

Figure 2: Australian Government Investments in Science, Research, and Innovation (%of GDP)

Source. Calculated from Science Research and Innovation Budget Tables, Department of Industry Science and Resources, December 2021 

Interest in public science is reflected in the origins and evolution of the DSTO (now DST) which goes back to 1907, the establishment of the Walter and Eliza Hall Institute in 1915, the CSIRO in 1916, the Mt Stromlo Observatory in 1924, the Bureau of Mineral Resources in 1946 (now Geoscience Australia), the Australian Atomic Energy Commission in 1953 (now ANSTO) the Rural RDC framework in 1989, and more recently the Australian Synchrotron in 2001.

These investments have been a foundation for Australia’s global leadership in physics, biotechnology, and materials sciences.

A national vision for public science

A national vision for building new capabilities or extending capacity in universities and public research organisations is lacking. Investments tend to be incremental, disjointed, short-term, and of relatively small scale. There is no cut-through to a bigger picture — like there is with big infrastructure projects.

In the SRI community, much time is spent on identifying megatrends and talking about possible future scenarios, but a lot less time is devoted to the articulation of missions, strategies – or even “moon shots” — and how to implement them.

As a result, there do not seem to be any major public science investment projects on the horizon — projects that might capture the imagination of voters and the community. Motorways, metros, and railways do a much better job.

We must take the scenario process further. For example, imagine that just 1% of the expenditure on infrastructure was reallocated to investment in public science — possibly an additional $5.3 billion a year. This would increase the annual public investment in SRI by around 40% to $17 billion annually.

To move from scenario to strategy, this investment could be allocated to the established research organisations: to the ARC to support basic research, to the CSIRO for strategic research, to the CRCs for collaborative research, to NCRIS to invest in research facilities, and to new research organisations established to address new research areas of national priority.

The additional funding commitment would be conditional on clear strategies developed from scenarios with robust business cases as a basis for investment. It would complement the $15 billion National Reconstruction Fund to operate over ten years from 2023-24. It would work like Infrastructure Australia is supposed to.

The strong construction lobby sits in stark contrast to a very weak and disorganised public science lobby. Public science must develop its narrative about its contribution to growth, prosperity, and a fairer society. It can learn a few things from how the construction lobby goes about its business and emphasises big projects.

Changing the narrative

Currently, the public science narrative is grounded in demanding “more money for science” and little else.

A better narrative should be developed around achievements and opportunities to create and build businesses in future industries, strengthen community organisations, and generate a fairer society.

Public science must work with one voice through unceasing communication, multiple channels, and effective engagement. There are currently multiple messaging coming from numerous science and research organisations.

Public science must be seen as accessible, responsive, and capable of working in partnership with industry, government, and the broader community to open up the new economy. It can be a key player in shifting the national culture from a frontier economy to a knowledge economy.

Originally published in Pearls and Irritations, November 22, 2022

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